Amazon explores offline channel to clear stock – Economic Times
The decision to venture into offline distribution was accelerated post demonetisation as sales of smartphones across channels took a big hit.
“Smartphone sales were down by almost 40% in November and 20% in December compared with the same period a year ago. It is no different in ecommerce. Hence, Amazon quickly forayed into offline distribution to clear its inventory and boost sales. It will soon come up with a proper policy to make this a full-fledged business based on the initial success,” said the CEO of a global cell-phone brand that sells exclusively on Amazon.
Amazon has exclusive deals across product segments such as televisions, appliances, apparel and accessories, shoes and baby products with a lot of global and Indian brands. Smartphones are the largest-selling category in ecommerce marketplaces.
The offline distribution venture of smartphones is being undertaken by Amazon Wholesale India, the cash-andcarry affiliate of Amazon.com Inc. This company runs the amazonbusiness. in website for all business-to-business sales.
Amazon Wholesale India representatives have approached several offline retailers for distribution of smartphones in various markets such as the National Capital Region, Pune and Nasik. The move, according to industry experts is an indication that the company plans to expand its distribution presence pan-India.
Amazon has pitched popular online brands such as OnePlus and Coolpad to offline retailers and indicated that their portfolio will be expanded, they said. The company will still make 3-4% margin from offline distribution of smartphones. “Amazon has plans to invest significantly to expand its offline distribution. For the online-exclusive brands, it’s a winning proposition since they don’t have to spend much money on creating infrastructure for warehousing and offline distribution and yet get immediate sales,” said the chief of a leading cell-phone retail chain.
In response to an email query, an Amazon India spokesperson said that Amazon Wholesale is the exclusive distributor for several mobile phone models, including all Coolpad models, for several quarters.
“Amazon Wholesale is focused on providing small businesses a purpose-built shopping experience on amazonbusiness. in website where they can purchase thousands of items, including mobile phones, consumables, office supplies, home & kitchen and medical supplies at wholesale prices in bulk quantities,” the spokesperson said.
OnePlus general manager (India) Vikas Agarwal, however, said the company is online first and has no intention of going offline in near future. “As OnePlus products are available exclusively on Amazon. in, select bulk or corporate gifting queries are handled offline by Amazon marketplace sellers. These are B2B orders and are not meant for sale on offline channels,” he said.
For Amazon, the wholesale operations gained pace this year with the entity now purchasing smartphones from brands and then selling it to various sellers, who in turn sell directly to consumers through the marketplace. Amazon Wholesale,which reported sales of `2.6 crore 2015-16, is all set to report exponential growth this year due to change in business strategy.
Earlier, sellers, led by Cloudtail, would procure models directly from brands. This arrangement was changed recently so as to reduce Cloudtail’s dependence on smartphones and more sellers got a share of the pie. The move was essentially worked to comply with the government’s FDI regulations, which states one seller or group companies cannot account for more than 25% of the sales on amarketplace.
Amazon is the latest large corporate to enter the business of smartphone distribution. Reliance Retail forayed into this earlier this year by selling 4G VOLTE smartphones, including its own Lyf handsets and Jio connection, to retailers. For the quarter ended September, Reliance’s distribution business had partnered, with over five lakh retailers across the country.
However, several offline retailers are sceptical about procuring exclusive smartphone brands from Amazon. “Several online-exclusive brands do not have extensive service network, which could become an issue considering the fact that consumers would come back to us if they do not receive proper service support,” said the promoter of a cell-phone store who has been approached by Amazon.