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Unorganised mobile retailers feel the heat in India

This is due to the entry of the deep-pocketed companies in India's retail business, reports Rasul Bailay.

india Updated: Dec 28, 2007 01:34 IST
Rasul Bailay

After street vendors, small shopkeepers and wholesalers, now unorganised mobile phone retailers are feeling the heat from the entry of the deep-pocketed companies in India's retail business even though the country's mobile subscriber market is the fastest growing in the world.

Several of the large Indian companies are lining up thousands of crores of rupees investment plans to open chains of stores selling mobile phones and accessories to capitalise on two of the country's fastest growing sectors -- modern retailing and mobile telephony.

The unorganised groups which currently dominate the mobile retail business now say that their businesses are under threat, thanks to cheaper prices at companies including Subhiksha Trading Services Ltd, RPG Enterprises, Spice Group, Essar Group, Reliance Retail Ltd among others who already have opened mobile phone stores nationwide and have aggressive plans in the coming years. Essar, Spice and RPG put together have plans to invest about $800 million in the next two to three years in mobile retailing alone.

According to researcher International Data Corp's India Quarterly Mobile Handsets Tracker, 60.62 million mobile handsets were sold in India in 2006 and that is expected to go up to 80.28 million by the end of this year. IDC expects the handset market to grow 32.4 per cent in 2008. Market watchers say India's overall market for handsets and its accessories, is around Rs1 lakh crore at present and is expected to grow three-fold in the next three-four years.

But anecdotal evidence suggests that small mobile phone retailers whose shops are in the vicinity of the organised chain stores may not get a share of the spoils, even though it's an exploding market. The mood among a cluster of small mobile phone retailers in Savitri Market in New Delhi's suburb of Noida is downbeat. Noida's mobile phone sellers went on a day-long strike in October to decry what they called unfair deals to them by mobile phone manufacturers.

Swami, who uses only one name and is an employee of My Mobile store in Noida can tell how the mobile business at his store has been dwindling in one of the most popular markets in New Delhi region for mobile phones and its accessories. Before January, My Mobile would sell goods worth about Rs 2.5 lakh on any given Sunday but sales started dipping about four to five months ago and the Sunday before Christmas, which should have been a busy period, with sales being down in the range of Rs1 lakh. "Our future is in danger," Swami says pointing to a Sony Ericsson Mobile Communications' service centre that doubles as mobile phone retail store located bang opposite My Mobile outlet. The Sony store opened a year ago.

Rahul Gupta, general secretary of Noida Mobile Dealers Association says small stores have to make purchases through distributors and organised retailers buy them directly from the company which he says is 4 per cent to 5 per cent cheaper. "Mobile is such a competitive trade where 4 per cent to 5 per cent means hundreds of rupees difference ... and we cannot match it even after reducing our margins," Gupta says.

The decline in sales is no surprise.

Indeed, an Indian Council for Research on International Economic Relations (Icrier) study, which spoke to nearly 1,600 small retailers in four top cities, already shows double-digit sales and profits decline at those retailers in head to head competition with large, branded stores. The study was commisioned by the government on concern small stores will be hurt by big retailers.

The Noida mobile sellers say they are forming a group so that they can have better negotiating and bargaining power with mobile manufacturers. "We are thinking of something like this (forming a group) in the future..if we don't do it we will be dead," says Gupta of the Noida association.

"We all dealers are getting together and will form a collective group that will deal directly with the (mobile) companies."

(Pankaj Mishra contributed to the story)