Apple, Samsung, Sony join hands to fight online discounts

KOLKATA -India’s retail trade may be having an Amazon moment. Earlier this month, senior officials of three global handset makers met to try and figure out what to do about cutthroat online pricing.

Of course, what they see as a menace is great for consumers who’re flocking to e-commerce marketplaces such as Flipkart, Amazon India and Snapdeal to find the lowest price for the electronic gadget they want. But the fact that representatives of three companies, normally battling against each other fiercely in the marketplace, came together on this issue is a reflection of how badly the traditional retail channels are getting hit.

This is somewhat analogous to what happened to traditional book trade in the US once Amazon became a force to reckon with. The companies are looking to fight back against what they see as pricing distortions and brand damage inflicted by the discounting marketplaces. Companies like Sony, Apple, Canon, Nokia and Samsung are planning to clamp down on distribution to sellers in popular online marketplaces and issue customer advisories not to buy from e-commerce portals as they are not authorized trade partners.
Herculean task ahead
Such products could even be fake and hence lead to problems with warranty support. While this may temporarily reduce the plethora of online deals, consumer electronic and mobile phone makers acknowledged that preventing such discounted sales across all online stores may be tough, since control of distribution is a Herculean task at a time when the market itself is down and in the absence of any predatory pricing laws in the country.

“True, there is no easy solution since monitoring a retail universe of more than two lakh sellers across online and offline to keep track of who is selling at disruptive pricing is a big task in itself. But still, a beginning needs to be made,” said a senior official with a leading mobile phone maker.

The issue has hit almost every manufacturer and retailers are getting increasingly frustrated at losing sales to e-commerce portals, which are passing on the 8-10% margin that manufacturers offer the trade.

E-commerce also happens to be at that stage of evolution where acquiring customers is critical, which means offering the lowest price, even to the extent of making a loss, makes eminent sense for them.

A senior official at a leading cellphone maker said the company had held several discussions with e-commerce marketplaces such as Flipkart and Snapdeal to find a solution, but these firms have passed the buck to the numerous sellers using their platform. Emails sent to Snapdeal and Flipkart did not elicit any response.

An Amazon India spokesperson said sellers using its platform are contractually obligated to list genuine products with a manufacturers warranty. “We are a marketplace platform that enables Indian merchants to sell products to consumers across India. As a neutral marketplace, we do not determine prices,” she said.

The problem has become especially acute since the last quarter, when general and modern trade lost substantial sales to online marketplaces that ran special discount schemes. Cellphone-and-gadget chain PlanetM Retail CEO Sanjay Karwa said indiscriminate online discounting has taken a toll on sales, but added that the brands are expected to crack down on such practices.

The company officials who met earlier in February discussed the discounting that, according to them, has been creating pricing and trade disequilibrium, and hurting brand image. While top executives confirmed that the meeting took place, no one wanted to go on the record because it could lead to allegations of price fixing.

Lenovo, Nikon and Toshiba have already issued consumer advisories warning customers about buying products online, including popular e-commerce marketplaces such as Flipkart, Amazon and Snapdeal, since they are not authorized trade partners. Lenovo India managing director Amar Babu said while the company was not against e-commerce and sees it as a potential partner, some marketplaces are contributing to pricing distortion. He also echoed the point about genuineness of the items as they aren’t official channel partners.

If a brand issues a consumer advisory, it will help control predatory pricing by e-commerce marketplaces, where products are sometimes even sold at a loss, said Himanshu Chakrawarti, CEO at the country’s largest cellphone retail chain, The Mobile Store. “The portals too need to act responsibly,” he said.

Canon India executive VP Alok Bharadwaj said the Japanese imaging major has begun appointing authorized online sellers linked to its website. “The authorized online partners will have to comply with our pricing norms and if there is any predatory price which can be damaging, we would take action,” he said.

While Sony India and Nokia India declined to comment, an email sent to Apple on Saturday did not elicit any response.

A Samsung India spokesperson said, “Samsung conducts its business in total compliance with the laws of the land. In the overall interest of the end users of our products and services, we respect the right of consumers to make informed choices and buying decisions.”

Considering what has happened in developed markets, the writing may be pretty much on the wall, say analysts. But that doesn’t mean traditional retail will give up without a fight.