Physical stores complain as online competitors thrive

DAR ES SALAAM: PHYSICAL store owners in Tanzania are raising concerns about an uneven competitive landscape, citing perceived inconsistencies in tax enforcement for online retailers.

They assert that these perceived inconsistencies, coupled with lower overhead costs, allow online businesses to offer significantly lower prices, thereby impacting their market share and reducing in-store customer traffic.

The crux of their argument revolves around the operational costs borne by physical stores, including Value Added Tax (VAT) and other overheads, which they claim are not consistently applied to some online sellers. This, they believe, results in a price advantage for online retailers.

Traders specialising in Sony electronic products expressed these concerns in Dar es Salaam during a recent interview at a meeting convened by Digital Future Solutions.

Ms Dorren Francis, a trader in Kariakoo, stated that increased online shopping, driven by lower prices and reduced operational costs, has created significant challenges.

“Customers frequently complain about our higher prices,” she said. “For example, a product priced at 800,000 Tanzanian shillings in our store might be available for as low as 500,000 Tanzanian shillings online.”

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She added that they are combating this by emphasising the warranty benefits provided by physical stores.

Mr Hassan Ahmed, another electronics dealer, echoed these concerns, highlighting the perceived price advantage gained by some online sellers through inconsistent tax application.

“Since some online sellers do not consistently issue VAT receipts, they can offer lower prices, making it difficult for us to compete,” he stated.

“Since they do not issue VAT receipts, they can afford to sell at lower prices, making it difficult for us to convince customers,” Mr Ahmed said.

The price difference has not gone unnoticed by consumers, as many are more price-conscious than qualitydriven when making purchasing decisions. Several customers, when asked about their buying habits, admitted to being drawn to online options primarily due to the lower prices.

“Online shopping is cheaper and in the current economic climate, saving money is a priority,” said Sarah Leonard, a Dar es Salaam shopper.

Yunus Bakari, an online trader, told the `Daily News’ yesterday that while the business is thriving, earnings are still lower compared to those running physical stores. “Although it seems like we’re earning well, our takehome is not the same as those with physical stores,” he said.

Mr Bakari dreams of opening his own store to maximise sales and income. He explained that they manage to sell at lower prices due to minimal overhead costs and by purchasing through ecommerce platforms.

“I buy in small quantities and once I pay the price, there are no extra charges—like taxes. This allows me to sell at minimal prices,” Mr Bakari said. “Sometimes I buy locally at wholesale prices to further reduce costs.”

The Sony dealers met with a representative from the manufacturer, Digital Future Solutions, in Dar es Salaam to discuss new product features.

The representative, Digital Future Solutions Chief Executive Officer Mr Preman Pondhen, said doing business in the country has improved, noting that in 2023, it only took two weeks to complete all the processes of opening a business.

“The government has been very supportive. We cannot do business without its support,” Mr Pondhen said. He added that Sony was once the leading brand in the country, but business slowed down due to market challenges.

However, with renewed efforts, they are making a strong comeback.

“We expect significant business growth. Currently, we are mainly covering Dar es Salaam, but we plan to expand to Mwanza and Arusha,” the CEO said.

Mr Pondhen further suggested that the government consider reducing taxes on electronics to make genuine products more affordable for the average consumer.

“We expect the government to do more to tackle the issue of counterfeit electronics,” he said.