Apple’s India love story: It’s all about distribution, not pricing

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By Shruti Dhapola /  28 Feb 2013 , 10:12

The iPhone is suddenly everywhere in India. From a full paper advertisement in your newspaper to posters in smaller mobile stores, Apple’s iPhone has maximum brand visibility in India right now, more than it has ever had.

For many this is sign that Apple is finally taking the Indian market seriously. With the iPhone 5 now available on EMI which starts with a Rs 16,000 downpayment, (you can read our decoding of Apple’s EMI offer here), it truly seems that the tech poster child is doing everything to catch your attention.

According to IDC tracker data, Apple is now suddenly number two in the Indian market in terms of revenue share, where smartphone manufacturers are concerned. Quarter 4 of 2012 saw Apple’s revenue rise to 15.2 percent in India, a massive jump considering that it was not even in the top five vendors in terms of market share in India in Q3 of 2012. Of course, the numbers have been helped by the fact that the iPhone 5 only launched in India in Q4, and the fact that the price of the iPhone 4S did come down in Q4. (Note, it was still much more expensive than say an S III or even the HTC One X.)

So what can we make of Apple’s increased presence in India?

Apple is still catering to a niche audience in India: If you think, Apple will start selling its goods for cheaper in India, forget it. According to IDC’s Senior market analyst for mobile phones and tablets, Manasi Yadav, “Apple has seen a huge jump in India and their revenue has quadrupled in India. But the fact remains that Apple is still not interested in price wars.” As far as Samsung and Apple are concerned, she states that ‘there is a huge gap in terms of price points.” For Apple, she stresses that the “client remains very different.”

Getty Images
The iPhone 5 in this file photo. Getty Images

Principal analyst at Garnter, Anshul Gupta also agrees that Apple is still catering to a niche segment. He points out that “the Indian smartphone market is very diverse and there are just too many price points.” Apple has obviously chosen the higher-end price point in India and it has worked for them in terms of revenue.

The point to note is this: Samsung Galaxy S III when it launched in India was out for Rs 43,000 but its price has now come down to Rs 28,000 on some online websites. Even the Note II was launched for Rs 39,900 and that price too has come down to Rs 35,000 on some websites. While Samsung is clearly comfortable slashing retail prices of its prized products, Apple doesn’t do that so quickly. iPhone 4S is still starting at Rs 33,000 on sites like Tradus, while on the official Airtel site, the phone costs Rs 38,500. Mind you, this is a two year old phone with a dual-core processor while the other two are quad-core.

Apple’s revenue may have increased in India but its strategy remains to target those who can afford a smartphone that is in the Rs 30,000 and above category.

The new distribution model: More than the pricing which has only superficial changes, this is what changed the game for Apple. As Manasi points, Apple’s tie-up with Reddington and Ingram Micro has helped them increase their presence on a national scale.

In fact when Tim Cook was asked about India in the investor call of Q3, 2012, he said “I love India but I believe that Apple has higher potential …in some other countries. But he also stressed that in India the multi-layered distribution in the country added to the high cost of production.

The tie-up with both the companies seems to have fixed a part of the problem that the Apple CEO was talking about. IDC’s Manasi points out that this has benefitted, “Apple by ensuring that the iPhone is now available in a store nearby. Apple isn’t just retailing with big retailers like Croma and Reliance ( the official Apple premium reseller) anymore. It’s network now includes even smaller shops.” In fact, I too was most surprised to find, smaller, local mobile shops in Green Park, Khan Market, etc in Delhi stocking not just iPhones but also iPods and iPads.

This strategy of increasing both its distribution and reach has definitely worked in Apple’s favour. There’s no doubt that the iPhone has gained a sudden spurt as far as visibility and availability in India are concerned. The benefit of this that for many people who’ve never used an Apple product or thought it was too expensive can now check out an iPhone in a store next door and experience it first hand.

The EMI scheme: While the visibility covers the basics of retail uptick, accounting theupward swing entirely to this trend would be short-sighted. While it is true that the latest version of an iPhone has never seemed so cheap India as it does right now with a downpayment of only Rs 16k, one needs to remember that this scheme was announced only in January 2013. Its results will only be seen in the data of Q1 of 2013 for India and analysts expect that it will have a positive impact for Apple. Once the novelty of Apple offering EMIs wanes, the numbers might plateau as well.

The aggressive EMI scheme that Apple has been promoting while great, still ensures that phones go to those with a 35 k and higher budgets and those can afford to pay for it on credit. Which is still a painful minority in India.

For now, its the new distribution system which deserves credit for bumping up Apple’s revenues, not the EMI scheme.


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