Oppo and Vivo have become household names in India as both of them continue to establish a strong presence in the country’s retail sector. The Chinese OEMs, thanks to their tempting trade margins, have managed to aggressively push their smartphones in offline stores and together, now account for roughly 17% of the total share. However, a new report by Economic Times, reveals that the companies have dramatically slashed off retailer cuts leading to a country-wide backlash.
According to the report, Oppo and Vivo have brought down margins by over 40% which has cost them partnerships with thousands of mobile phone stores. For large retail chains, the share has been reduced from 23-25% to 14-15%. Individual stores which until now were largely dependent on these huge profit margins have suffered an even more critical blow from 15-16% to 5-6%. TechPP could individually confirm with its own sources that the retailer margins have taken a hit.
Moreover, sources say Oppo and Vivo have lost more than ten thousand outlets each. Both had nearly 70,000 tie-ups each before this action. Industry analysts mention the number will continue to fall as more owners come to know about it. Leading chains including Sangeetha Mobile, Big C, Lot Mobile, Poorvika, Mobiliti World, and Hotspot have already halted sales for the two brands, all of which combined have over 1300 branches.
An Oppo representative confirmed the report and touted the new Goods and Service Tax as one of the reasons behind this move. “Every market has a different policy and the margin is decided basis market dynamics… These adjustments are being done across markets by different smartphone industry players… All these decisions have been taken keeping in mind health of the company. We believe the company will now be healthier and efficient,” he added further. A Vivo spokesperson, on the contrary, denied the margin cuts and said the company plans to add more outlets under its network this year.
With most of the smartphone brands, unlike before, now focusing on offline channels, it will be interesting to see whether Oppo and Vivo are able to hold onto their shares in the country. Both of them have progressed into the top five smartphone makers club primarily because of these huge profit margins. Perhaps, they will now partially shift their resources to online platforms as well.