Xiaomi and realme initiate crackdown on online discount scalpers: Report

Smartphone makers like Xiaomi and realme are taking action against scalper retailers trying to profit by selling devices at lower prices online.

Economic Times reports that these companies are focusing on boosting growth in India’s second-largest smartphone market through offline channels.

Response to Retailer Complaints

Following complaints from retailer associations, Xiaomi and realme are repurchasing stocks sold at lower prices to identify and penalize the retailers and distributors involved.

Brands are issuing warnings to retailers, who must sign agreements promising not to sell products outside authorized channels to avoid penalties and loss of business.

Undertakings Against Unfair Practices

Reports show instances of retailers in Jammu, West Bengal, Haryana, Tamil Nadu, and other regions signing such undertakings.

This crackdown follows complaints from the All India Mobile Retailers Association (AIMRA), representing 1.5 lakh mobile phone retailers, about products being sold online at prices (Rs. 1,000 to 2,000) lower than their minimum operating prices (MOP).

Brand Response and Shift in Sales Dynamics

AIMRA expressed concern in a letter to realme, stating, “This is a real alarming situation…losing the ground and faith of the mainline retailers.” Similar letters have been sent to Xiaomi, urging brands to take action against scalper retailers.

In response, a Xiaomi representative vowed to address the issue, stating, “We are purchasing the stocks to find the source and fix it with heavy penalties.”

This move comes as offline retail sales surpass those from online platforms. IDC India estimates that online platforms (Amazon and Flipkart) accounted for 48% of total sales in January-February, down from 49% in 2023.

Retailer Grievances

Retailers blame brands for setting steep sales targets, forcing them to liquidate stocks through alternative channels. Brands prefer online sales due to lower overhead costs compared to retail stores, where distributor and retailer margins affect pricing.

Some products are exclusively sold online to maintain aggressive prices, while others remain exclusive to retail stores. Retailers sometimes list products on rival platforms to meet sales targets, exacerbating the issue.

In the words of a Delhi-based retailer, “With such hefty targets on us, we have no choice but to liquidate stocks through other means.” The situation highlights the ongoing struggle between brands, retailers, and online platforms in India’s dynamic smartphone market.

Speaking about the situation, All India Mobile Retailers Association said to ET,

This is a real alarming situation to hear that a brand has allowed the ecommerce platforms to register retailers online, majorly wholesalers, to sell their products just to gain shares but actually losing the ground and faith of the mainline retailers who have been putting hard efforts to sell product to the consumers with best of their abilities.