Apple Must Turn To India For Salvation Amid Sluggish Worldwide iPhone Sales

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With a net market valuation of nearly $800 billion, Apple Inc. (NASDAQ:AAPL) is now world’s most valuable publicly traded company. The name Apple is synonymous with innovation and is widely considered to constitute the cutting edge of consumer tech. Apple’s products consistently grace the top of numerous best-selling charts, with their standard-setting iPhone 7 being the best-selling smartphone in the world. It is safe to say that Apple has conquered most of the global smartphone market.

However, if there is one country where large-scale success has eluded Apple so far, it is India. While this was fine for a long time when European and US markets were driving the growth of Apple, it can be incredibly risky if Apple ignores India any longer.

India Is Fast Becoming One Of The Most Lucrative Smartphone Markets

India has a massive population of 1.34 billion, making it the second most populous country in the world. This fact alone underlines the immense potential of the Indian market. However, for a long time, India was considered unripe for effective exploitation due to the nature of the market itself. The lack of fast wireless connectivity, low per capita income and low smartphone penetration meant that any avenues for growth were blocked by a metaphorical brick wall.

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However, there has been a drastic change in the Indian landscape over the past year or so. The disruptive launch of Reliance Jio 4G services triggered a price war among Indian telecom companies. The increased proliferation and low dirt prices for 4G connectivity have truly pushed India into the era of 4G.

According to a Kantar World Panel, 31% of consumers cited 4G capability as the deciding factor in their smartphone purchase. By the end of Q1 2017, smartphone penetration in India has reached 48%, registering 16% growth compared to the year before.

The report also highlights that nearly 52% of existing Indian smartphone users are looking to upgrade in the next 12 months. Interestingly, after Samsung, Apple is the second most preferred brand for 15% of users for their next upgrade.

Apple Look To India As Global Sales Dwindle

Despite being a global smartphone leader, Apple’s presence in India is somewhat limited. Apple accounts for a mere 3% share of the Indian smartphone market. Apple only sold an estimated 2.5 million iPhones in India in the calendar year 2016. This wasn’t any concerning issue when Apple was sustaining growth from American, European and Chinese markets, but that is no longer the case.

Apple shipped 50.76 million units of iPhones globally in its second fiscal quarter of 2017. This is slightly lower than 51.19 million iPhones shipped during the same period last year. This is worrying for Apple since the iPhone makes up nearly 63% of Apple’s net revenue. Revenue projections for the fiscal 2017 third quarter are also down between $43.5 billion and $45.5 billion. With Apple also losing considerable ground in China to its competitors, India becomes more and more vital to their plans.

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Apple Can Learn From Chinese Vendors In India

If there is anybody, who has learned how to crack the Indian market, its the Chinese contingent of Xiaomi, OPPO, Vivo and Lenovo. From Q1 2016 to Q1 2017, their share of the Indian market has blown up from 27% to 50%.

So what lessons can Apple take from their success?

  • Competitive Pricing – Smartphones live and die by their value proposition in a cutthroat market like India. The Kantar report carries the fact that 32% of India consumers cited getting a good price as their top purchase influencer. Apple latest venture to start manufacturing some iPhone models in India should help cut on import fees. This will subsequently result in more competitively priced iPhones.
  • Importance Of Retail Stores – When it comes to purchasing smartphones, the Indian consumer’s store of choice is a good old fashioned brick and mortar. Nearly 68% of smartphones sold in India are currently purchased from brick-and-mortar stores, while only 21% of smartphones sold online. Also, 31% of consumers report visiting a retail store before deciding on a purchase. In fact, this is how brands like OPPO, Vivo and Lenovo managed to gain a foothold in India. Together, these three Chinese majors account for 56% share of quarterly smartphone shipments in India. Apple’s reported partnership with Chroma to open a number of Apple Stores in India should greatly help their sales presence.
  • Catering To Local Demands – Like we previously mentioned, users in India value different features in their smartphones compared to the US users. Apple can appeal to consumers by marketing desirable features such as enhanced selfie camera feature.
  • Local Manufacturing – Apple’s decision to start manufacturing in India via supplier Wistron affords a number of benefits to Apple. This means that Apple can cut down on import fees, making the iPhone more financially accessible. This also allows Apple to launch its online store in India, directly selling its products and services without any middle man.
  • Collaborating With Service Providers – Apple has teamed up with Reliance Jio to offer free 4G services to new iPhone 7 and iPhone 7 Plus users for up to one year. This may be the first step in Apple bringing their incredibly successful carrier sales model to India.

Takeaways

  • Apple’s falling sales in the major markets such as US and China make India more important than ever. Expect Apple to double down and aggressively pursue the Indian market in the near future.
  • Although Apple’s sales in India were paltry last year, we might even expect as much as 10-20 million iPhones to be sold next year. If that happened, Apple would grab a sizable share of the Indian market this year itself.
  • The roll-out of 4G services and increased smartphone penetration in India means that more users are looking to upgrade smartphones than ever before. We could possibly experience a boom in smartphone sales in India this year.
  • Local manufacturing and the launch of Apple Stores in India should help Apple to raise its sales profile considerably. This should also help the company to compete in the lucrative $180-$300 price segment of the market which is dominated by Chinese vendors.

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