Online Retail in Global Consumer Electronics Market: A Bittersweet Relationship between Manufacturers and e-commerce Websites
The consumer electronics market has witnessed a significant change with online retailers gaining preference over conventional brick-and-mortar retail stores. Consumers are enjoying shopping from the comfort of their homes through card payment and receiving delivery of the goods at their doorstep. E-commerce platforms offer customer wider options, best rates, and lucrative deals. Most net-savvy customers prefer researching consumer electronics online than visiting a store. Various studies have shown that consumer electronics are the most popular product category to be shopped online. With the global consumer electronics market estimated to be worth US$1,550.34 billion by 2022, online platforms have a significant role to play in the growth trajectory of the market.
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Why do Consumers Prefer e-commerce Websites to Shop Consumer Electronics Products?
Amazon, the poster child of the global e-commerce industry, created ripples when the sales of consumer electronic goods through the website started affecting the traditional retail stores. Other e-commerce platforms followed in Amazon’s footsteps. To compete with these shopping websites, some electronic goods manufacturers such as LG, Dell, Whirlpool, Samsung, and Nokia have invested in direct online channels or have tied up with dedicated sellers who exclusively sell their products. So, why do consumers prefers to buy a smartphone online rather than from a brick-and-mortar store?
- Price: Consumers tend to look for the cheapest price of an electronics good through both online and offline channels. E-commerce websites usually offer attractive discounts and deals on consumer electronics, which the dedicated physical stores can’t afford.
- Convenience: A customer living in a small town might not like to visit the nearest consumer electronics store located a few hundred miles away. But with e-commerce websites expanding their delivery networks, consumers can receive their goods at the doorstep.
Dispute between Consumer Electronics Manufacturers and Online Retailers
The consumer electronics market in Asia Pacific is going strong with growing demand from China, India, and South Korea. E-commerce platforms in the region have also flourished, with consumers increasingly opting to buy consumer electronics online. Though these online retailers were once the darling of consumer electronics manufacturers as they helped increase sales, all is not rosy anymore.
Manufacturers are unhappy over the pricing discounts offered by the online retailers on products such as mobile phones, laptops, and cameras. Sony, Lenovo, Toshiba, Canon, and Nikon have either cut warranties on their products sold through online shopping websites or have blacklisted these websites. By offering discounts, popular e-commerce websites sell consumer electronics products below market operating prices. The market operating price is the lowest price that retailers can offer. Manufacturers put the market operating price to maintain their profit margins and consistent pricing across their sales network. With the online retailers selling goods below market operating price, the physical retail stores of the manufacturers are bearing the brunt.
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Purchase Data: The New Offering of Online Retailers to Consumer Electronics Manufacturers
However, the partnership between the consumer electronics manufacturers and online retailers cannot be negated. Even though disputes over sales prices persist, manufacturers are depending upon the online shopping websites to gather sales tracking and browsing data, which helps them understand and analyze the performance of their products in the market across various consumer groups. The ‘purchase data’ also helps the manufacturers while planning new products. As far as the price war is concerned, the manufacturers need to focus on dedicated online and retail stores to leverage their position against the e-commerce websites.