Vivo And Oppo Revamp Distribution Strategy In India, To Ensure Compliance With Local Regulations

In a strategic move to comply with Indian regulatory demands and alleviate long-standing tensions with the government, smartphone giants Vivo and Oppo, subsidiaries of China's BBK Group, are restructuring their distribution networks across India. 

According to a report by The Economic Times, aim is to localise distribution structures by appointing Indian distributors in each state. It is expected to help in minimising reliance on Chinese-owned intermediaries.

According to industry executives familiar with the matter, both Vivo and Oppo are transitioning away from their previous reliance on Chinese-owned distribution companies, commonly referred to as agents, towards a model where Indian distributors become the primary source of product supply to retailers.

This shift is expected to enhance transparency and compliance with local regulations.

Vivo is reportedly leading the charge by eliminating Chinese-owned agents in Delhi, Punjab, and Haryana, and replacing them with Indian distributors. This model will soon be replicated in other states as well.

The company plans to absorb Indian employees of these distributors or relocate them to newly-appointed local distributors, while Chinese expatriates are expected to return home due to visa restrictions exacerbated by the COVID-19 pandemic.

Similarly, Oppo has initiated a pilot project in Delhi, replacing its Chinese distributor with an Indian counterpart, with plans for national rollout.

This restructuring is part of a broader effort by Chinese smartphone manufacturers to appease Indian authorities amid intensifying scrutiny over allegations of customs duty evasion, income tax issues, and money laundering.

The Indian government has repeatedly urged Chinese smartphone companies to localise their operations, including manufacturing and distribution, and appoint Indian talent in senior management positions.

While Xiaomi and Realme have already embraced this approach from the outset, Vivo and Oppo are now following suit by leveraging Indian contract manufacturers and appointing local distributors.

Despite their significant market presence, both Vivo and Oppo have faced challenges in India, with Oppo reporting a 9 per cent decline in sales in FY23 attributed to "tough market conditions." Meanwhile, Vivo's sales saw an 11 per cent rise during the same period. 

However, both companies are keen to strengthen their foothold in the Indian market, which remains one of the world's largest and most lucrative for smartphone manufacturers.