The mobile phone category is in for a double whammy in the new e-commerce policy. On one hand the exclusivity prohibition will leave many brands scrambling to invest in new local channels and on the other, aggressive discounting on online platforms could be a thing of the past.

Terming the new e-commerce policy a step to appease the offline retail trade lobby and counter to consumer interest, Lloyd Mathias, strategic investor and former HP and Motorola executive , said that this policy may have been a key consideration in an election year.

“Mobile phones being amongst the largest categories in the e-commerce space will be the most impacted… Deep discounts will come down thereby forcing consumer to fork out more for their mobile phones,” Mathias told BusinessLine. This comes at a time when online channels (e-tailers and brand’s own e-tail) make up around 37 per cent of the total domestic smartphone market, according to International Data Corporation (IDC). IDC found that the smartphone market reached an all-time high of 42.6 million unit shipments in the third quarter of 2018, registering 9.1 per cent year-on-year growth.

Mathias felt that the biggest hurdle will be for mobile handset makers with exclusive tie ups with e-commerce platforms where some brands had an ‘online only’ distribution model. They will now have to invest in physical distribution, which will add to their cost.

Sanchit Vir Gogia, Chief Analyst, Founder and CEO of Greyhound Research, said that the policy impacts Chinese brands like Xiaomi and One Plus, which primarily used e-commerce platforms to push their inventory. They will now have to look at investing fresh dollars in tier-2, -3 and tier-4 markets, where their partner base is “not that strong right now and in some cases, non-existent.” He said that this is “an area of deep concern” for such Chinese brands, while calling the policy a “spirit dampener” for online retail. However, now that aggressive discounting will be curbed, this policy is going to reduce the pressure on offline retailers to reduce their prices, said Gogia.

IDC had reported on December 20 how one out of three consumers consider availability of good deals as one of the prime reasons for buying a new smartphone. IDC attributed this to “multiple sales events backed by high decibel marketing especially by eTailers”. “…Almost 40 per cent of consumers prefer online channel for the overall comfort and convenience, followed by prices offered by e-Tailers,” the report stated.

It remains to be seen if this trend will be nipped in the bud by this new policy and its bearing on discounts.

Navkendar Singh, Associate Research Director – Devices and Ecosystem : India & South Asia, IDC, said that with the ongoing consolidation of smartphone market shares among top five or six brands, the smaller brands will find it much harder to find pockets of growth, since they preferred online channel as the primary GTM strategy.

According to IDC, Xiaomi is the number one smartphone brand in the Indian market with nearly 30 per cent share.

The Chinese brand has nearly 60 per cent share of the phones sold online. Only time will tell if the new policy will emerge as the nemesis of such brands and reinstate the glory of brands like Samsung, which has a strong presence in offline retail.

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