E-commerce: Conflicting Trends

While some vendors like Lenovo and Toshiba are washing their hands off the proliferating online trade, others like Dell and Acer are embracing e-commerce, albeit with measured steps

Lenovo recently snubbed e-commerce sites by declaring that they are not authorized to sell its products, and buyers must think twice before they succumb to their lucrative offerings.

Lenovo isn't the first to proclaim its stand against e-commerce sites selling a plethora of commodities at low prices. Toshiba in the month of January announced that online shopping sites are not a part of their channel fraternity.

So are vendors gradually declaring their non-allegiance with e-commerce sites? While it might seem that some are washing their hands off the proliferating online trade, there are others who are embracing the internet albeit with measured steps.
"The Indian online market is still a relatively new phenomenon," says S Rajendran, chief marketing officer, Acer India. He thinks that riding on increasing levels of internet penetration, usage of smartphones, and a growing appetite amongst Indian consumers for online purchases, the Indian e-commerce industry is expected to witness further uptake and growth. "Acer has existing partnerships with leading online e-commerce websites such as Flipkart," says Rajendran. He declares that Acer will continue to engage with online shopping sites without ‘disrupting the focus on our existing channel partners in the market'.

So is there an effort from the vendor's side to leverage the growing popularity of e-commerce in India? P. Krishnakumar, executive director and GM, Consumer and Small Business, Dell India, says, "We like to be present in all the avenues where consumers would like to buy our products. We believe in offering our consumers a choice of the route in which they want to purchase our products."

For Dell online stores are just another option to tap Indian consumers which are largely concentrated in tier 1 cities like Mumbai, Delhi and Bengaluru. The company sells through its own online site, LFRs, traditional partners, Dell exclusive stores and OLS. It has around 170 exclusive stores across eighty Indian cities. Recently Dell had some attractive valentine offerings on its Venue tablets on Flipkart.

Krishnakumar explains, "In tier-1 cities, we prefer LFRs and online stores along with exclusive and multi-brand stores". For Dell traditional channel partners still remain viable option to reach out to customers in tier 2 and tier 3 cities. For household penetration we are dependent on IT channel and as this part of the country does not access internet sites to buy commodities. There remains a huge opportunity for partners in these cities and we are inclined in enabling them here."

Distribution policy is certainly seeing a metamorphosis as more and more vendors are concentrating on their exclusive stores to entice customers. " We are very aggressive with our retail expansion strategy. We presently have more than 100 retail stores. Tier II, III & IV cities have been our prime focus for expansion. We are majorly focusing on ASUS Exclusive Stores," says Peter Chang, regional head - South Asia, country manager - System Business Group, ASUS India.

Currently ASUS has above 90 plus exclusive stores operating in India. In addition to this online portals are emerging as the new hub to tap the Indian gluttony for the internet of things. Asus too has partnerships with several online stores to cater to its customer demands. "Asus products are available on all major online platforms like flipkart with unique value proposition. These e-commerce portals buy products from ASUS national distributors," states Chang.

ASUS has associations with almost all the major large format retails and online models. According to company spokesperson, LFRs and OLS have certainly escalated their reach in a vast and diversified market like India.

So what is the brouhaha over online stores and LFRs snatching IT channels' bread and butter? Why channel partners have an axe to grind when it comes to LFRs and OLS?

It is the price disparity which is accentuating the menace called e-commerce and large format stores and snatching away partners' peaceful sleep.

So DQ Channels put the question directly to vendors: There is a price disparity on IT products in e-commerce sites and what offline stores have to offer. How it is so?

ASUS says, "There are numerous ‘online portals' being engaged in retailing our products. So far we have noticed that the majority of the listings happened on the top rated online portals are done by parties/ resellers who are using the portal as a medium (marketplace) to enable the transactions. There might be sporadic cases of price disparity, which, we believe are mostly contributed by such resellers, who do not have a direct relationship with us."

Dell seems to accuse the resellers too. "We maintain price bands within which the consumer can buy the products through any of their preferred choice of shopping - e-commerce, online, Dell Exclusive stores, LFRs, Multi brand stores. Our partner
margin structure allows for that. This takes into account the convenience for the
customers. However, on the e-commerce platforms there are also partners who sell in the market place and that is a market behavior which the partner community engages in and does self-control," explains Krishnakumar.

E-commerce sites have reasons to sell commodities at prices below the fair price offered by offline stores. Shailesh Chitnis VP of Marketing at Compile explains the mystery behind low prices. In his Wall Street Journal blog Shailesh writes, ‘Venture capital investors poured close to $700 million into 50 e-commerce sites in the past three years. Many of the start-ups founded in India during this time were focused on e-commerce'. He further goes on to state that ‘to attract buyers, many e-commerce sites offered deep discounts on their products. But price wars are expensive and there isn't any evidence than customers attracted by low prices, will remain loyal once the retailer starts charging full price'.

He indicates in his blog that India's e-commerce intoxication will become profound in the coming days. There is a long way to go before India becomes seasoned to the lure of online shopping sites: ‘It seemed obvious that if even a small part of the country's 1.2 billion-strong population starts buying goods and services online, this industry would be gold', he states. And so the future of online retail in India looks bright and the recent $50 million-investment, led by eBay into Indian deals site Snapdeal.com is proof that many companies want a piece of this, writes Shailesh.
And vendors would certainly leverage this forthcoming OLS fever to achieve growth in the otherwise slow marketplace. "The market dynamics have certainly evolved in the past few years. Large format retails and e-commerce have become essential part of sales and marketing strategies to cover the diversified target audience in the country," says Chang.

As a Boston Consulting Group reports, the internet is projected to reach small towns and the low rungs of the economic ladder more quickly than retail chains will. Therefore with just 10% of India's population accessing the Internet, there's plenty of growth ahead.