E-tailers help consumer durable firms prune costs

Purvita Chatterjee Mumbai | Updated on January 23, 2018 Published on May 19, 2015



Online marketplaces charge lower margins and also aid companies in finding buyers

Predatory pricing may be the prime reason why companies like LG and Videocon are desisting from selling their white goods online, but at the same time there are a slew of other consumer durable players who have appointed Flipkart, Amazon and EBay as their official e-commerce partners.

While Japanese brand Sansui has appointed Flipkart as its official partner, Godrej Appliances has been resorting to eBay, flipkart and Amazon as an additional channel to reach out to a wider audience.

Even luxury television maker Vu is dependent on partners like Snapdeal as it manages to give lesser margins compared to brick-and-mortar retailers.

The reasons for going online may differ for each player. While Sansui may want to get rid of its unsold inventory, in the case of Vu, it is the advantage of not having to pay high rentals at malls. Godrej Appliances views the online marketplace as an additional channel whose costs are lesser than offline retailers thereby leading to lower margins.

“We have a direct sales arrangement with Flipkart whereby we sell our televisions directly to them and negotiate on the pricing. There are products like end-of-season SKUs which we want to get rid off through the online channel,” says Amitabh Tiwari, Chief Operating Officer (COO), Sansui.

As for other online sites, Sansui claims to have an ‘indirect’ arrangement with them. “With sites like Snapdeal, we have an indirect arrangement where they are free to buy from our dealers and sell at whatever price they want,” added Tiwari.

Even in the case of Vu Televisions, online sales have compensated the company for the high rentals it has had to pay at brick and mortar stores in malls. “We were forced to shut down some of our stores at malls due to high rentals. The best part about online sites is that they charge margins as low as six per cent while offline dealers demand a huge chunk at 30 per cent,’’ says Devita Saraf, CEO, Vu Technologies.

In fact, lesser margins are a prime driver for going online as such players do not have high overhead costs. As Kamal Nandi, Business Head & Executive President, Godrej Appliances says, “While we sell to our online partners at market operated prices, the margins depend on the cost incurred by the channel in selling our products.”

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Published on May 19, 2015
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