Oppo, Vivo face backlash from retailers over cut in margins

Chinese smartphone makers Oppo and Vivo have been facing a backlash from many mobile phone retail chains over a 40 percent cut in retail margin, reports The Economic Times.

The two phone makers together account for 17 percent share in the Indian smartphone market and have lost 10,000 sales stores each after the cut in trade margin. Industry experts told the newspaper the number of sales stores are likely to fall further.

The report said big retail chains such as Sangeetha Mobile, Big C, Lot Mobile, Poorvika, Mobiliti World and Hotspot have significantly reduced or halted sales of these two firms’ smartphones.

The firms founded by Chinese billionaire Duan Yongping, decreased the profit margin for large retail stores to 14-15 percent from 23-25 percent and for standalone retail stores 5-6 percent from 15-16 percent.

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Subhash Chandra, Managing Director of Sangeetha Mobile told the newspaper they have stopped selling products from Oppo and Vivo in Tamil Nadu over margin issues and both brands have different margin structure in different states creating a problem for multi-state retailers.

Oppo India confirmed on the margin changes and the drop in number of outlets to ET. The company said some stores were no longer able to sell handsets after the goods and services tax was introduced. It further added the company has changed its strategy to focus on mid- to high-end models and some stores had to be shed when their sales didn't match expectations.

Vivo India, however, specified retail network has not shrunk and the company plans to add outlets this year.

Both companies have significantly cut down their marketing investment in the last three months over outdoor, television and print advertising in order to become profitable.

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http://www.moneycontrol.com/news/business/oppo-vivo-face-backlash-from-retailers-over-margin-cut-2478483.html