Hard fact: Fraudulent resellers corner 40-45% of online sale of smartphones

Smartphones form the bulk of sales for e-commerce companies such as Amazon and Flipkart. But here is a twist in the tale. Most of these smartphones are not being purchased by end users and instead are finding the place on shelves of shops across the country.

A bulk of these sales are from fraudulent resellers and not actual smartphone users, according to market research firm techARC.

“Around 40-45 per cent of online smartphone sales are fraudulent transactions initiated by resellers.” The research is based on interviewing retailers, distributors, logistics companies and others in the value chain.

These resellers often manipulate loopholes in e-commerce websites to order popular smartphones in bulk. These devices are then sold in brick-and-mortar stores, where the resellers “(take) advantage of the brand pull as well as unavailability of specific models online after the flash sales are over,” techARC noted.

With this volume of reseller fraud prevalent,  the pure online sales contribution declines to 21-24 per cent of the total smartphone sales.

The reseller fraud is hurting the entire online e-commerce value chain of Smartphones.

The e-commerce companies often lure the customer with discounts, buyback offers, and easy financing options. The catch here is affordability of phones on these platforms. They are always chasing exclusive tie-ups with phone-makers to bring people better deals.

However, resellers making bulk purchases are absorbing the perks of lower prices by eventually selling the phones in the stores at the market retail prices. Sometimes, limited or out-of-stock models may even be sold at a premium.

Besides customers, smartphone brands and retailers also get duped by the rosy picture thus emerging from the sales figures. Some brands may overestimate the increase in their online smartphone sales and wrongfully shift focus away from offline retail, thereby hurting sales.

Offline channel partners may also enter into alliances with predominantly online smartphone brands, buying stories of their success, which may or may not turn out to be entirely true.

To address the issue, both the online as well as offline channel players shall have to come together with support from the brands, says the research agency.  While the brands could come heavily on such resellers who are caught in such unethical trade practices, the digital commerce platforms need to plug the loopholes to stop the fraud.