Smartphone makers like Xiaomi and realme are cracking down on scalper retailers who try to profit by selling devices at lower prices online.

Economic times reports that these companies are focusing on driving growth in India's second-largest smartphone market through offline channels.

Responding to Merchant Complaints

Following complaints from retail associations, Xiaomi and realme are buying back the stock sold at lower prices to identify and penalize the retailers and distributors involved.

Brands are issuing notices to retailers, who must sign agreements promising not to sell products outside authorized channels to avoid penalties and loss of business.

Commitments against unfair practices

Reports show instances of retailers in Jammu, West Bengal, Haryana, Tamil Nadu and other regions signing such pledges.

This crackdown follows complaints by the All India Mobile Retailers Association (AIMRA), which represents 1.5 lakh mobile phone retailers, about products being sold online at prices (between Rs 1,000 and Rs 2,000) below their retail prices operating minimums (MOP).

Brand response and change in sales dynamics

AIMRA expressed its concern in a letter to Realme, saying: “This is a real alarming situation… losing ground and the faith of major retailers.” Similar letters have been sent to Xiaomi, urging brands to take action against scalper retailers.

In response, a Xiaomi representative promised to address the issue, stating: “We are buying the stock to find the source and fix it with strong penalties.”

This move comes as offline retail sales outpace those from online platforms. IDC India estimates that online platforms (Amazon and Flipkart) accounted for 48% of total sales in January-February, up from 49% in 2023.

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Merchant Claims

Retailers blame brands for setting high sales targets, forcing them to liquidate stock through alternative channels. Brands prefer online sales due to lower overhead costs compared to retail stores, where distributor and retailer margins affect prices.

Some products are sold exclusively online to maintain aggressive pricing, while others remain exclusive to retail stores. Retailers sometimes list products on rival platforms to meet sales targets, compounding the problem.

In the words of a Delhi-based retailer, “With such major targets upon us, we have no choice but to liquidate stocks through other means.” The situation highlights the ongoing struggle between brands, retailers and online platforms in India's dynamic smartphone market.

Speaking on the situation, the All India Mobile Retailers Association said that E.T,

This is an alarming situation to hear that a brand has allowed e-commerce platforms to sign up online retailers, mainly wholesalers, to sell their products just to gain shares, but actually losing the ground and faith of mainstream retailers who have gone to great lengths to sell products to consumers to the best of their abilities.

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