Online gadget deals hurting retailers: Future Group, Reliance Digital and others seek strict pricing policies

KOLKATA: Electronics retail chains such as Future Group's eZone and Reliance Digital say heavy discounting by online retailers on popular smartphones and tablets such as the iPhone 5, Galaxy S4 and iPad is hurting them, and have asked manufacturers to take measures to stop such deals.


Chains such as The Mobile Store, Reliance Digital, Future Group and Next Retail have approached brands like Apple, Samsung, Nokia and BlackBerry, asking them to impose strict pricing policies on shopping websites such as Flipkart, Infibeam and Snapdeal.

"Indiscriminate discounting by online stores affects our sales to quite an extent," says Rajan Malhotra, president at India's largest listed retailer Future Group, which runs 38 eZone stores. "If we get pushed due to such discounting, we definitely have to push back with the brands," he says, confirming that the firm has taken up the issue with manufacturers.

Tne Apple iPhone 5 16GB, for example, is available online for Rs 40,950 while at retail chains and Apple stores it is sold for Rs 45,500. The BlackBerry Z10 is selling at less than Rs 40,000 online against the retail price of Rs 42,499. Such discounts are available on products such as the iPad, Samsung Galaxy S4 and Nokia Lumia.

Brian Bade, CEO at Reliance Retail's electronic retailing format Reliance Digital, says brands have to take a tough stand against such online deals that hurt the business. "Consumers often come with the online discounted price in mind and leave the store without concluding the purchase," he says.

As per industry estimates, modern retail contributes around 12% of the Rs 37,000-crore mobile phone and tablet market in India while online retailers make up around 4-5%.

BRANDS VERSUS MODERN TRADE

Brands say they follow the same pricing and trade promotional schemes for online and offline retailers while online retailers say lower operational costs allow them to offer higher discounts than offline retailers.

But modern trade is not convinced. The chief of a leading electronics store says the firm has questioned brands on their margin structure.

"With wafer-thin margins of 4-7% in mobile phones and information technology (IT) products like tablets, it is not possible for any retailer to offer the discounts which the online stores offer. Something is wrong somewhere and unless the brands take corrective action, we may have to stop stocking the latest models whose sales are usually hit the most," he says on condition of anonymity.

Apple, whose products seem to carry maximum discounts online, declined comment on the issue.

Samsung India's head of mobile phone business, Vineet Taneja, says the brand offers uniform MRP for its products, with the trade partners free to offer consumers their own pricing within the MRP.

"Market dynamics ultimately dictate pricing and discounts in the market," he says.

BlackBerry India spokesman Varghese M Thomas, too, said the brand follows uniform pricing and product service policy for its products across markets.

Online retailers say they can offer lower prices because they don't have to invest large amount of capital on prime real estate and maintain stock at all locations.

"Practically, one can serve an entire city in online retail with a single stockroom," Vishal Mehta, founder and chief executive officer of Infibeam.com, says. "The savings for online retailers come from lower inventory costs, which get passed on to end-customers in the form of great offers," he says.