Reliance Retail Breaks Partnership With Realme; Margin War In Smartphone Niche Triggered?

Since last few months, we have reported how leading smartphone brands like Realme, Oneplus, Xiaomi and others have been pushing for an offline route to sell their smartphones.

But now, it seems that a new margin war has erupted, which can derail the offline plans for smartphone brands.

And the first casualty has already been reported: Realme and Reliance Retail have call-off their partnership, and this is not a good sign for offline retail.

Reliance Retail, Realme No More Friends?

Last November, Oppo and Realme had entered into a special partnership with Reliance Retail to sell their smartphones in India. Reliance Retail had planned to sell Realme smartphones via 600 outlets in India, and Realme/Oppo is one of the most popular, and fast-rising brands in India.

The partnership seemed perfect.

However, this partnership is no more.

Reliance Retail will no longer sell Realme smartphones via their outlets, and this is a huge setback for Oppo’s offline push in India.

Realme India CEO Madhav Seth has confirmed that the “collaboration with the Reliance group has been called off”.

Not only Reliance Retail, but Realme’s partnerships with South Indian major retailers such as Sangeetha, Poorvika and Big C have also been terminated.

What Exactly Is The Reason Here?

Realme is offering very low margins on their smartphones, and this is the main reason for this partnership being called off.

While #1 smartphone brand in India: Xiomi offers 5-6% margin for every smartphone sold, #2 biggest brand Samsung offers 5-11% margin on every smartphone.

Realme only offered 4% margin, and this didn’t work out it seems.

Madhav Seth has emphasized that Realme doesn’t want to make ‘profit at the cost of customer’, and their company wishes to offer “offer real price of the products” to their customers.

Margin War Triggered In Smartphone Niche Now?

Normally, battles over margins are known in the FMCG industry, where retailers and distribute fight over 0.1% to 5% margin on products.

The products are fast moving, and are sold in bulk, and even a difference of 0.1% can make a huge difference in the overall revenues of any company.

However, the fight over margins is seen for the first time in India, for smartphones.

As of now, Realme has been selling their best-sellers via Amazon and Flipkart, and due to less margin offered there for sellers, the company has been able to offer high-end smartphones at low cost to the customers.

But offline business is entirely different ballgame, and the retailers need a higher margin to balance high real estate and operations cost.

Considering that brands like Xiaomi, Samsung, Oneplus, Nokia, Asus, and others have been investing heavily into their offline expansion, it would be tough for Realme to ignore the sector.

Will Realme increase margins for their offline partners or the price for customers will be increased?

We will keep you updated, as more details come in.

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