Apple cuts iPhone X margins for Indian retailers
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Stores in India which sell the iPhone X have complained about the reduction in retail margins by Apple from 6.5% to 4.5%. Large chains and even small-scale operators are accusing the company of wanting to scoop in massive margins while not allowing its retail partners to benefit.
Some stores, like the Bengaluru-based Sangeetha Mobiles, had stopped taking orders for the iPhone X. This comes as a supply-demand mismatch in India has led to calls for Apple to give the country a higher priority when it comes to providing stock in time. iPhone production has fallen to the extent that it has affected the bottom line of companies like Foxconn which assemble the devices.
Subhash Chandra, managing director at Sangeetha Mobiles, says: “Apple has cut margins on the iPhone X from 6.5% to 4.5% for large retailers like us, and if a customer pays by card, which is usually the case, the margin reduces to almost 1.5-2%.”
Sangeetha Mobiles has about 400 stores across India. “Apple gives the least margins… How on earth do they expect the retailer to work for them for free — our overheads are anywhere around 10%,” complained Chandra.
The margins offered by brands like Samsung and Xiaomi are more than double what Apple does – 12% to 15%. Brands like Oppo and Vivo are giving higher than usual margins in order to compete better in the burgeoning Indian market.
Quoting an unnamed chief executive of a top retail chain as saying that he would not be stocking the iPhone X at its 300-odd stores due to the reduced margins and because he had no control on retail pricing both offline and online.
“Apple gives the least margins… How on earth do they expect the retailer to work for them for free — our overheads are anywhere around 10%,”
Underling the supply issues, another big handset retailer said he had received only 400 iPhone X units since the launch, much less than what had been promised by Apple.
Analysts told the newspaper that if Apple did not step up supplies, it may be unable to bridge the gap with Samsung and the numerous Chinese brands that were already ahead in terms of volume sales.
India has about 350 million smartphone users, a number that is expected to grow to 500 million in the next couple of years. Many new buyers or those looking to upgrade are potential iPhone users.
One analyst, Neil Shah, the research director at Hong Kong-based Counterpoint Research, told the newspaper: “They (Apple) will have to start now because if they lose a window of opportunity in next two years to be on mind of the growing smartphone user base, it would be somewhat difficult to grow faster in the world’s second largest smartphone market.”
Questions & Answers
Q.What specifically caused retailers to complain about Apple's margin reductions on the iPhone X?
What specifically caused retailers to complain about Apple's margin reductions on the iPhone X?
Retailers are complaining because Apple reduced margins from 6.5% to 4.5%. This falls even further, to 1.5-2%, when customers pay by card, making it difficult to cover overheads which are around 10%.
Q.How do Apple's margins for retailers compare to those offered by other smartphone brands?
How do Apple's margins for retailers compare to those offered by other smartphone brands?
Apple's margins are significantly lower than competitors. Brands like Samsung and Xiaomi offer 12% to 15%, which is more than double Apple's reduced rate, and Oppo and Vivo also provide higher margins.
Q.What other issues are impacting retailers selling the iPhone X in India, beyond margin cuts?
What other issues are impacting retailers selling the iPhone X in India, beyond margin cuts?
Retailers are also struggling with a supply-demand mismatch, with one reporting only 400 units received since launch. They also have no control over retail pricing, both online and offline.
Q.Why is it crucial for Apple to address supply and retailer concerns in India soon?
Why is it crucial for Apple to address supply and retailer concerns in India soon?
Analysts suggest Apple risks losing a crucial window to connect with India's growing smartphone user base. Failure to act may make it difficult to compete with Samsung and Chinese brands in the world's second-largest smartphone market.
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