GST pressure pushes e-commerce giants to offline market to sell smartphones
Amazon will start with brands like Coolpad, Motorola, Lenovo, Huawei and One-Plus and is talking to Samsung and Xiaomi to extend it to their popular models like Samsung On5 Pro and Mi, respectively.March 20, 2017 | comments ( 0 ) |
Two of the country’s largest marketplaces, Amazon and Flipkart, are set to push sales of their online exclusive smartphones through brick-and-mortar stores, a move aimed at expanding the business in India and preparing for the goods and services tax (GST) regime, which will reduce the price difference between offline and online markets.
GST is expected to be rolled out on July 1.
Amazon will start with brands like Coolpad, Motorola, Lenovo, Huawei and One-Plus and is talking to Samsung and Xiaomi to extend it to their popular models like Samsung On5 Pro and Mi, respectively.
The company had earlier tested the waters with offline distribution of smartphones when it had excess stock after demonetisation, but has now firmed it up as a proper business in India.
Flipkart is yet to finalise its plans, but it has given an indication to the brands that it will look at expansion of the smartphone business through the offline distribution and sales route.
The offline foray will be made by Flipkart India, which runs the wholesale arm, industry executives said. However, plans are still at an early stage.
A senior industry executive said, "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."
He said, "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."
While Amazon did not respond to an email, Flipkart declined to comment. At Amazon, the move is being undertaken by Amazon Wholesale India, the cash-and-carry affiliate of Amazon.com, three senior industry executives said. This company runs theamazonbusiness. in website for all business-to-business sales, but the offline distribution of smartphones will be done independently by offline distributors appointed by Amazon.
It has already roped in such distributors in Andhra Pradesh, Delhi, Haryana, Maharashtra, Karnataka, West Bengal, Tamil Nadu, Telangana and Uttar Pradesh, an industry executive said. The chief of a leading online exclusive brand said since several such brands have a tight budget which becomes a constraint for them to expand in the offline market, it helps if the ecommerce firms with which they already have a business relationship can take the business offline.
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