Following a drop of more than 40% in smartphone sales since the festive season due to aggressive online discounting, three of south India's largest cellphone retail chains - Sangeetha Mobiles, Poorvika Mobiles and BigC Mobiles - have decided to pool resources. They're planning to fight online retail by creating a common back end to negotiate higher margins and launch exclusive models through their stores.
These three chains -which together control more than 65% of the smartphone market in offline retail in the south with 765 stores and cumulative sales of more than Rs 3,000 crore -have initiated discussions with Samsung, LG, HTC and Micromax and expect to launch their first such exclusive models next month.
Samsung is considering a brickand-mortar-only model in India after the backlash from large retail chains over online discounting and the difficulty of controlling this, two senior industry executives said.
"Coming together will help us to improve both topline and bottomline," said BigC Mobiles chairman and managing director Balu Chowdary . "As per negotiations with the brands, we expect to soon roll out one model each from Samsung and HTC next month," he said.
Smartphone sales in modern retail have been hit by discounts offered by online marketplaces, such as Flipkart, Amazon and Snapdeal, since early October. While there was a pickup in sales in the week preceding Diwali, sales have now flagged due to occasional offers from online retail and the current Great Online Shopping Festival, which is a Google initiative. As per estimates, ecommerce accounts for 12-14% of total smartphone sales in India.
Creating a common back end will help get better margins since volumes have slumped, said Sangeetha Mobiles MD Subhash Chandra.
"The smartphone brands too are happy since they too are breaking their heads on how to control online discounting which is unsettling the brick-and-mortar stores," he said.
Poorvika Mobiles CEO N Yuvaraj said the three are trying to create a complete portfolio of exclusive models, right from entry to high end. "We together can purchase much more than online stores or any other retail chain and hence can command better bargaining power with the brands," he said.
Micromax CEO Vineet Taneja said the brand is interested in partnering with retail chains, including the three in the south, but wants a com mitment on sales volume to make such a move commercially viable."We are flexible and have the capabilities to develop a new model at the fastest pace," he said.
A Samsung India spokesman said the brand is continuously evaluating and introducing exclusive promotions and programmes to expand sales through large retail partners.He declined to provide details but said the brand has several differentiated plans for the future.
E-commerce marketplaces have launched exclusive models. Motorola handsets available exclusively through Flipkart have racked up sales of more than 2.5 million.Xiaomi also sells phones only through the site.
The MobileStore CEO Himanshu Chakrawarti said the chain also wants to sell exclusive models after the successful launch of the BlackBerry Z3 through its network.
"However, it may be a temporary respite since consumers in India have a natural gravitation to online due to increased internet penetration and discounting. We need to evolve a long-term strategy," Chakrawarti said.
UniverCell founder D Sathish Babu said his company is also evaluating such a strategy but the risk is that it has to give the brand a commitment on sales volume.
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