Mobile Handset dealers up in arms

The profit margins of mobile phone dealers is continuously decreasing in Gujarat. Some handset dealers are ready to sell instruments on a profit as low as Rs 50 to Rs 100.

While handset companies are tightlipped on the issue, most dealers say the margins are dropping in all segments. Even with the premium segment prices, the margin is Rs 150-200, said a handset dealer who believed that dealers could hardly get profit over Rs 500.

"Margins are usually thin in handset market especially when there are so many players who have numerous retail outlets in the state. Dealers are willing to sell the handsets at a profit margin of less than 1 per cent, " said Vivek Palod, Director, Mobile Magic.

In order to sustain, we have been offering various schemes along with the handsets to make the margins affordable, added Palod, whose company is offering Titan Fast Track goggles worth Rs 900 with a Nokia N91 priced at Rs 24,600.

Nokia are market leaders in the handset market with sources putting their market share between 70-75 per cent followed by Sony Ericsson, Motorola and Sony. But inspite of the companies' tie-ups with cellular operators for pre paid and post paid schemes, handset dealers say intense competition is forcing them to cut margin by nearly 50 per cent even on handsets that are just a week old in the market.

In Ahmedabad, the GSM market is around 75,000 handsets and it is the priority dealers who have been worst hit by the margin cut since they are competing directly with street sellers who sell popular premium handsets at throwaway prices.

Vadodara is facing a similar situation. Complaining about the negligible margin, Rakesh Upadhay of Rayrhythms, a well know mobile outlet at Vadodara, said, "Margin is too low in mobile business due to huge competition from the small mobile sellers".

On an average 12,000 handsets are sold per month in Vadodara. Out of which 50 per cent market is captured by Nokia.

"The only thing that sustains mobile dealers is the volume", said a major mobile dealer at Alkapuri area of Vadodara . He further said, "The average margin is 0.5 per cent in Vadodara per mobile".

In some cases, the mobile dealers have even settled down with zero margins. Dealers say selling without any margin is now more of a habit than requirement and their focus is now on bringing more customers leading to increased volume sales.