KOLKATA: Apple may soon be slugging it out in the trenches with Samsung and other smartphone rivals as India country head Maneesh Dhir and telecom business chief Sanjay Kaul seek a rapid increase in the pace of growth in India, a market that it has neglected until recently.
While the iPhone has always been an object of desire, Apple wasn’t able to make a big dent in India because of pricing issues peculiar to this country – handsets aren’t subsidised by contracts as in other parts of the world. Until recently, this was taken to mean that Apple wasn’t really interested in pushing sales in the world’s largest mobile market after China, while companies such as Samsung have pitched their products hard in India.
Samsung leads the India smartphone market with a 36% volume share, according to research firm Canalys, while Apple’s was 2% in the April-June quarter. Apple’s value share is higher at 5%, it said.
To their credit though, Dhir and Kaul have tried to work around their constraints by offering iPhones and other devices on installment, tapping a considerable vein of pent-up demand.
Dhir and Kaul are now putting the next piece of their strategy in place. Apple wants to enter smaller Indian cities and towns with iPhones, iPads and iPods as it feels these markets can deliver on its bid to grow fast.
“Apple has realised that if it wants to grow fast in India, it has to look beyond the metros,” said the CEO of one of India’s retail chains. “The company wants to grow upwards of 30% year-on-year in India and feels the smaller markets would play a critical role since the aspiration level of Apple products amongst the youth and rich is growing there as well.”
Apple to enter smaller Indian towns with iPhones, iPads Dhir joined Apple India three years ago from AOL Inc, where he was the global head for international business, and changed the way Apple was doing business in the country. He hired Kaul from BlackBerry India, expanded the team threefold to more than 150 executives, strengthened the Apple exclusive stores network, shortened the gap between the launch of new models overseas and in India and spearheaded the company’s thrust on iPhones.
Apple CEO Tim Cook acknowledged the importance of India for the first time in July while announcing the April-June results, declaring that iPhone sales in the country grew 400% during the quarter, albeit on a small base. The company also reported double-digit growth in India’s iPad sales.
The new marketing vision for India was unveiled on Monday evening at a meeting with 20 CEOs and senior executives of the country’s top multi-brand telecom and electronic retail chains. Apple India’s senior executives spelt out plans to enter the top 50 tier II and III markets in India by selling its phones, tablets and portable music players at their outlets in an exclusive corner or a shop-in-shop, said three people who attended the meeting. They requested anonymity since Apple officials had asked them to keep details of the meeting confidential.
Apple spokesperson in London did not respond to a questionnaire emailed on Wednesday.
The move comes amid Samsung’s success in the Indian hinterland, said a senior executive with a retail chain, besides which companies such as Sony and Nokia have been able to sell smartphones costing in excess of 30,000 in areas outside the metros. The 16 GB iPhone 5 costs 45,500. India pricing for the upcoming iPhone models – the 5C and the 5S – hasn’t been announced yet.
Apple wants to set up 100 exclusive standalone stores under the franchisee model in smaller markets. It’s scouting for franchise partners and has made proposals to some of the multi-brand retail chains, the executives said. Apple has not set any deadline for setting up these stores in smaller towns in India, but is looking to roll them out this fiscal year.
The Apple meeting with retailers was chaired by Dhir and Kaul. Those attending included representatives from retail chains such as Next Retail, Croma, Future Group, Reliance Retail, The Mobile Store, UniverCell Telecom, PlanetM Retail and Spice HotSpot. A senior retail chain executive said it may be a challenge to set up Apple stores in smaller towns, considering the stringent standards for such outlets.
“Getting such space or investing so much on decor may not yield appropriate return on investment from small-town stores since sales cannot be at par with the stores at metros, even though Apple has committed a margin of 15-20% provided the sales targets are met. It sounds ambitious,” he said.
Analysts and trade partners feel Apple’s move to expand its distribution penetration into smaller towns is a sign that the Indian operation is being given greater autonomy. The India operation currently reports to the London office of Apple, which is the hub for Europe, the Middle East and Africa, aside from India.
While Apple headquarters in Cupertino, California, still controls the launch of new products and pricing for individual markets, the Indian team led by Dhir and Kaul is now making itself heard.
“The Apple top brass did not showcase its two upcoming iPhone models, the 5C and 5S, their pricing and possible launch date in India during the meeting. But discussing more serious business plans and seeking ideas is a bold step for a company which has always kept itself shrouded in secrecy,” an executive said.
Canalys analyst Jessica Kwee said Apple has room to grow in India, but pricing will still be an issue. “The Indian smartphone market is growing very fast, boosted by handsets in the sub-$300 segment. So it is unlikely that Apple’s market share will grow fast per se in India, but in terms of overall volume shipment, we believe there is room for Apple to grow,” Kwee said