Phone Retailers reach out to Government over predatory pricing by etailers

Brick and mortar retailers have urged the government to curb the practice of etailers who alliance with with smartphone makers in exclusive tie-ups and offer lower prices to consumers. The festive season sales are about to begin and the buildup of the retailers’ inventory owing to “predatory online pricing” has led to huge job losses as also shutting down of retail business outlets.

The All India Mobile Retailers Association (AIMRA) represents thousands of retail stores across the country. AIMRA has written letters to the commerce ministry, the Competition Commission of India (CCI) and the Department for Promotion of Industry & Internal Trade (DPIIT).

According to the letters written by the association, such predatory online pricing and exclusivity has damaged the ecosystem of the trade beyond repair. It is alleged that more than 30,000 mobile phone retail outlets across the country have been shut down in the past one year.

The allegations against online retailers have come despite the government’s move last year to change foreign direct investment (FDI) rules for the e-commerce segment. The new rules were intended to ensure a better pricing balance between online and offline sellers and at forcing handset makers to expand their presence in the bricks-and-mortar segment as well.

When the rules were notified, the government had barred online marketplaces from signing exclusive deals for products on their platforms and also directed that a single vendor could sell a maximum of 25% of its inventory on an e-commerce platform. However, according to AIMRA President Arvinder Khurana e-commerce players have been working around the rules.

He further alleged that online channels are provided with the new models of cell phones first and only once the sales start dwindling after a couple of months, they are released to offline retailers.

Khurana also said that the enormity of the issue is intensified ahead of the festive season — which is considered a make-or-break period for much of the retail industry — since online sellers potentially take away a large chunk of customers before offline retailers even begin to offer discounts to customers.

In the letter written by the AIMRA, it is alleged that more than 56% of the e-commerce business is related to the mobile industry and elimination of the practice of smartphone makers giving exclusive models to e-commerce platforms is vital for the survival of domestic trade.

Further it is alleged by the AIMRA that there is an illegal practice of some unregistered retailers who bought online-exclusive models in bulk at discounted rates, during the online sales period, and later resold them in the offline market at higher prices. Such retailers don’t pay the Goods and Services Tax (GST) leading to revenue loss for the government according to the association.

The association said that this was on top of the low GST that the government was getting on the low-priced smartphones that many manufacturers were offering by cutting down on distribution margins.