[Global Network Technology Reporter Chen Jian] Vivo and OPPO's offline operations have been excellent, not only in the Chinese market, but also in the Indian market. However, due to strategic considerations of the two Chinese smart phone manufacturers, the profit sharing of payments to Indian mobile phone retailers has been reduced by more than 40%. This has caused strong opposition from many mobile phone retailers and chain stores, and some stores even stopped selling Oppo. And Vivo smartphones.
According to the Indian media “The Economic Timesâ€, Oppo and Vivo recently reduced the profit margin of trade by more than 40%, resulting in the loss of more than 10,000 stores. From this figure, the two companies had about 70,000 physical stores selling mobile phones before the profits were cut. OPPO and vivo originally provided 23% to 25% of profit shares to Indian mobile phone chains and 15% to 16% of profit sharing to independent mobile phone retail stores. After reducing profit sharing, the profit sharing provided by OPPO and vivo to mobile phone chains in India fell to 14% to 15%, and the share provided to independent mobile phone retail stores fell to 5% to 6%, which is equivalent to a 40% profit reduction. .
Not only are some small stores annoyed by the drop in profit margins, even large retail chains like Sangeetha Mobiles, Hotspot, Poorvika, and MobilitiWorld do not like this profit margin adjustment. These chains either stopped the sales of Oppo and Vivo phones or reduced their focus.
As we all know, the physical retailers in small towns and second- and third-tier cities often give consumers the incentive to buy mobile phones from these two companies because of the high profit margins. Since these profits have disappeared, they have no incentive to make extra efforts. Unless a certain compromise is reached in the next few weeks, the smartphone sales figures for the next few quarters will be detrimental to both companies. The two companies together accounted for more than 17% of the total share of the Chinese smartphone market.
Although Oppo admitted that profit margins have decreased and the number of physical stores has dropped, Vivo has denied any decrease in the number of physical stores selling mobile phones.
An OPPO India spokesperson confirmed the report on the adjustment of the profit distribution of mobile phone dealers and the decline in the number of cooperating dealers. The spokesperson stated that after the introduction of merchandise tax and service tax in India, some retail outlets were unable to sell the company’s smart phones. He also stated that OPPO's strategy in India is not satisfied with the low-end market and has shifted to mid- to high-end equipment, as some retail outlets have not reached sales expectations and thus terminated their cooperation with them.
The chief executive of an Indian mobile phone retailer stated that the reason why OPPO and Vivo were forced to cut retailers’ profit share in India was to face the pressure to achieve profitability. "After gaining a certain market share, they followed the strategy in China to slow down the high investment. But the Indian market is different from the Chinese market, and the market share of their two companies has already begun to decline." He said.
OPPO and VIVO have adopted a similar path to the Chinese market, often starting from the third and fourth tier cities, focusing on mid- to low-end machines, using a large number of offline advertising, developing dealers and agents, and occupying a large market share. Then he went to the middle and high end to increase his profits, but it is clear that India’s national conditions are not the same as those in China. Both companies have been reporting big jumps in the Indian market's turnover, but are still at a loss. They have reduced expenses in marketing and promotions, and advertising in different media has also decreased significantly.
The trouble with Vivo and Oppo may eventually help Xiaomi. In the past few quarters, Xiaomi began to focus on the online retail business, and also established a cost-effective image in the Indian market, and has become a strong competitor in the mobile phone market in India.