Facing worries that China’s voracious iPhone appetites might soon wane, Apple is ramping up operations in a country many view as its last great untapped growth opportunity: India.
Traditionally, Apple has seen little point bothering with a market dominated by rudimentary phones and thrifty customers. India is mentioned three times in its latest annual report, compared with 27 for China. The company plans 40 Chinese retail stores by the end of 2016. In India, it is yet to open a single one.
yet with iPhone sales growth slowing from 30 per cent or more to the mid-single digits over the coming quarters, according to Wall Street projections, cracking India’s nascent but potentially vast market is becoming a more urgent priority.
Friday sees one indication of Apple’s new seriousness, with the India launch of its Watch — offering a sign that the company thinks there are now enough wealthy buyers to justify a product favoured mostly by upper-end customers.
More importantly, the arrival of the latest iPhone 6S — which launched in India in October, backed by a blizzard of billboard advertisements in cities such as Mumbai and New Delhi — marked the first time Apple included India in its top tier of national markets, where devices arrive soon after they go on sale in the US.
“Earlier we would get the latest [model] six months late, but now it is quicker,” says the head of one Indian retailer. “And you can see the kind of advertising they are doing on the roads.”
Apple starts from a low base. Its market share hovers between 1 or 2 per cent by volume, far behind first placed Samsung, although its handsets do grab as much as 10 per cent by value, according to New Delhi-based Counterpoint research.
Ben Bajarin, analyst at Creative Strategies in San Francisco, estimates iPhone sales will double during 2015, although only from 1m to 2m — a rounding error among the 231m Apple sold over the past fiscal year.
Even so, with hundreds of millions of users upgrading from basic models for the first time, research group IDC say India is now the fastest-growing major smartphone market. It will also overtake the US to become the world’s second largest in 2017 — giving Apple plenty of room to grow.
During last week’s results earnings call, Tim Cook, Apple chief executive, said he was “impressed with our progress” in India, alongside other rapidly developing markets such as Vietnam and Indonesia, in part the result of a recent organisational rethink.
chart: Global smartphone shipments to India
Apple has shaken-up its links with distributors this year, pushing more of its iPhones into the kind of small corner stores in midsize cities where many middle-class Indians buy electronics. The revamp means Apple products are now available in 4,000 outlets, the company says.
There have been new deals with telecoms carriers such as UK-based Vodafone too, as well as closer links with ecommerce sites such as Amazon and Flipkart, which are pushing aggressive iPhone discounts during this month’s season of Indian religious holidays, traditionally viewed as an auspicious time to shop.
The company has also tried to address its most obvious growth barrier — namely that while potential Indian customers lust after Apple's brand, they balk at its prices. India’s average smartphone sells for about $130, roughly half the equivalent price in China. Even the most basic iPhone 6S costs $900 or more, however, while telecoms companies decline to subsidise handsets, putting off many customers.
New tie-ups with local finance companies to offer cheaper monthly payment plans could curb these feelings of sticker shock. Elsewhere, Apple is pushing generous buyback schemes, and offering big discounts on older phones such as the iPhone 5, to tempt abstemious buyers.
Chart: Apple in India
Ultimately, if Apple is to to take India seriously, it must open its own retail outlets. Here the company is still taking baby steps. Next month, it launches a handful of new “store-in-store” mini-shops in outlets run by Croma, an electronics outfit owned by Tata, India’s largest conglomerate.
Another sign of growing ambitious will come if Apple begins to manufacture iPhones in the country, a step the prime minister, Narendra Modi, asked Mr Cook to consider during a meeting in Silicon Valley in September.
Mr Bajarin notes a pattern in Apple’s gradual Indian ramp-up, however. The company also “took their time” before making a big push into China, waiting for 4G mobile penetration to rise, for instance. “Apple looks at that market [India] and says they are not quite ready yet,” he says.
Yet the company's recent moves show it is now preparing busily for that moment, argues Anshul Gupta at research group Gartner. “Apple is playing a long game, laying the groundwork, but it is clear India is crucial to their future,” he says. “Growth in China is not going to go on for ever, and then where else is left?”
Traditionally, Apple has seen little point bothering with a market dominated by rudimentary phones and thrifty customers. India is mentioned three times in its latest annual report, compared with 27 for China. The company plans 40 Chinese retail stores by the end of 2016. In India, it is yet to open a single one.
yet with iPhone sales growth slowing from 30 per cent or more to the mid-single digits over the coming quarters, according to Wall Street projections, cracking India’s nascent but potentially vast market is becoming a more urgent priority.
Friday sees one indication of Apple’s new seriousness, with the India launch of its Watch — offering a sign that the company thinks there are now enough wealthy buyers to justify a product favoured mostly by upper-end customers.
More importantly, the arrival of the latest iPhone 6S — which launched in India in October, backed by a blizzard of billboard advertisements in cities such as Mumbai and New Delhi — marked the first time Apple included India in its top tier of national markets, where devices arrive soon after they go on sale in the US.
“Earlier we would get the latest [model] six months late, but now it is quicker,” says the head of one Indian retailer. “And you can see the kind of advertising they are doing on the roads.”
Apple starts from a low base. Its market share hovers between 1 or 2 per cent by volume, far behind first placed Samsung, although its handsets do grab as much as 10 per cent by value, according to New Delhi-based Counterpoint research.
Ben Bajarin, analyst at Creative Strategies in San Francisco, estimates iPhone sales will double during 2015, although only from 1m to 2m — a rounding error among the 231m Apple sold over the past fiscal year.
Even so, with hundreds of millions of users upgrading from basic models for the first time, research group IDC say India is now the fastest-growing major smartphone market. It will also overtake the US to become the world’s second largest in 2017 — giving Apple plenty of room to grow.
During last week’s results earnings call, Tim Cook, Apple chief executive, said he was “impressed with our progress” in India, alongside other rapidly developing markets such as Vietnam and Indonesia, in part the result of a recent organisational rethink.
chart: Global smartphone shipments to India
Apple has shaken-up its links with distributors this year, pushing more of its iPhones into the kind of small corner stores in midsize cities where many middle-class Indians buy electronics. The revamp means Apple products are now available in 4,000 outlets, the company says.
There have been new deals with telecoms carriers such as UK-based Vodafone too, as well as closer links with ecommerce sites such as Amazon and Flipkart, which are pushing aggressive iPhone discounts during this month’s season of Indian religious holidays, traditionally viewed as an auspicious time to shop.
The company has also tried to address its most obvious growth barrier — namely that while potential Indian customers lust after Apple's brand, they balk at its prices. India’s average smartphone sells for about $130, roughly half the equivalent price in China. Even the most basic iPhone 6S costs $900 or more, however, while telecoms companies decline to subsidise handsets, putting off many customers.
New tie-ups with local finance companies to offer cheaper monthly payment plans could curb these feelings of sticker shock. Elsewhere, Apple is pushing generous buyback schemes, and offering big discounts on older phones such as the iPhone 5, to tempt abstemious buyers.
Chart: Apple in India
Ultimately, if Apple is to to take India seriously, it must open its own retail outlets. Here the company is still taking baby steps. Next month, it launches a handful of new “store-in-store” mini-shops in outlets run by Croma, an electronics outfit owned by Tata, India’s largest conglomerate.
Another sign of growing ambitious will come if Apple begins to manufacture iPhones in the country, a step the prime minister, Narendra Modi, asked Mr Cook to consider during a meeting in Silicon Valley in September.
Mr Bajarin notes a pattern in Apple’s gradual Indian ramp-up, however. The company also “took their time” before making a big push into China, waiting for 4G mobile penetration to rise, for instance. “Apple looks at that market [India] and says they are not quite ready yet,” he says.
Yet the company's recent moves show it is now preparing busily for that moment, argues Anshul Gupta at research group Gartner. “Apple is playing a long game, laying the groundwork, but it is clear India is crucial to their future,” he says. “Growth in China is not going to go on for ever, and then where else is left?”
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