Chinese mobile makers to feel heat as e-com discounts end: Micromax

Indian phone manufacturer Micromax said Chinese smartphone makers got easy access to the Indian market through tie-ups, with e-commerce firms without building a distribution network. Moreover, they would face a challenge, as e-commerce firms look to cut losses to build a sustaining business after a fierce battle to acquire market share.

“With heavy discounting deployed by major online e-commerce portals in the country, the year saw a fierce battle among them to grab the market share…The online platforms gave a lot of Chinese brands an easy India launch pad without much investment in the distribution and service channel,” said Vineet Taneja, chief executive officer of Micromax Informatics, in a note outlining smartphone trends for 2016.

A recent International Data Corporation (IDC) report backs Micromax’s concern. In October, top Chinese vendors such as Lenovo, Xiaomi and Vivo witnessed a healthy month-on-month sales growth of 18 per cent, much of which came from online shopping only. According to IDC, about nine-10 million smartphones are sold every month in the Indian market. In October, the share of online sales rose to 41.2 per cent from that of 33.5 per cent in September.

The online commerce firms fought a fierce battle among themselves to gain market share in 2015. Micromax said the heavy discounting might end next year as the e-commerce firms would like to cut their losses.

“In 2016, e-commerce might flatten out, as these platforms will cut back their cash burns. However, the reach will expand to newer towns and consumer segments and will be a key driver of technology adoption,” Taneja wrote.

Online retailers have been facing flak from brick-and-mortar shop owners for eating into their market share. Apparel and garment dealers and several traders associations have earlier called for their bans. The Association of Shoe Manufacturers of India had dragged the e-commerce firms into courts, alleging that they have violated foreign direct investment rules.
 
The Indian Mobile and Internet Association (IAMAI), a body representing the internet and e-commerce firms, said these companies have not flouted any rules.

“The IMAI supports the e-commerce firms and we believe these companies have not violated any norms,” said an official of the association asking not to be named since the matter is under trial.  

Apart from building a robust distribution channel, Micromax said it has also tied up with e-commerce players to boost sales.

“The company has one of the largest channel distribution ecosystems in India, coupled with strategic partnerships in place with all leading e-commerce players in the country, contributing immensely to our sales proving to be the leading Indian mobile phone brand.” said Taneja.