The big names in Indian online retail, Amazon and Flipkart, are making efforts to take the sale of their exclusive mobile phones offline. The two ecommerce competitors plan on using physical stores to expand their businesses in the country. In addition to this, the etailers are also planning this move as a means to ready themselves for the goods and services tax (GST) implementation on July 1. The pair is expecting this to minimise the difference in prices between online and offline markets.
Amazon’s offline route
US-based Amazon has already tested out the offline retail scene. After demonetisation, the online marketplace had offline distributors take care of its access stock of smartphones. Now, it has managed a proper set up for the offline sale of its exclusive smartphones. The ecommerce company will begin by offering brands like Lenovo, Coolpad, Motorola, One-Plus and Huawei through its offline distributors. Amazon is also speaking with Samsung and Xiaomi to have their popular smartphone models included in this means of retail.
It will use Amazon Wholesale India, its cash and carry affiliate of Amazon.com., said three senior industry executives. This section of the company runs the amazonbusiness.in site for all business-to-business sales. However, the offline sale of smartphones will be taken care of by those distributors appointed by the marketplace. According to an industry executive, distributors have already been appointed in –
- Tamil Nadu
- Andhra Pradesh
- Uttar Pradesh Telangana.
In 2015, the foreign online platform tried building a seamless online/offline presence with Udaan. It also has plans to target rural potential through offline stores. And, just last month, IOS reported that the marketplace will be getting into physical food retail with two stores.
Flipkart’s offline route
Unlike Amazon, it appears that Flipkart’s plans to go offline have not been finalised yet. However, it has indicated to smartphone brands its intention to expand through offline sales.
The offline plan for Flipkart is likely to begin with its Flipkart India, which handles the company’s wholesale business, claimed industry executives. The Indian online marketplace aims to have brick-and-mortar stores soon like Amazon in small towns and rural areas. Its online fashion arm, Myntra, is already setting up its offline store in Bangalore. So, it shouldn’t be long before the etailer’s offline plans kick in.
Word from experts
One senior executive stated, “At present, online sellers sell from low value added tax (VAT) markets like Bengaluru and Hyderabad where VAT on smartphones is 5% while it is much higher in most of the other markets, with the national average at around 10-12% whereby they have a pricing advantage to sell at such low prices.”
“This difference will be wiped away when GST comes into effect which will make online and offline a much more level playing field. Hence, Amazon and Flipkart are preparing to grow the business in the post-GST era since they already have agreements with several brands for exclusive distribution in India,” the same source revealed.
Also, it is difficult for online brands to expand offline through physical stores on account of tight budgets. So, the fact that online marketplaces are taking their business relationships offline is beneficial to online brands, mentioned the chief of a top exclusive online brand.