Food
Imagine being in the hustle and bustle of everyday Mumbai traffic, and spotting an Apple Store across the street. This is about to get real, as Apple Inc. is on course to open its first single-brand retail outlet in India. Sources told Bloomberg that applications for retail business are already under process, with no approval date finalized as of yet. In his recent town hall meeting, CEO Tim Cook personally confirmed that the tech giant is going to open Apple Stores in India.
Such a deal is believed to exempt Apple from local regulations, according to which, single-brand stores need to assemble products comprising 30% of locally-manufactured components. Currently, the company sells its iPhones, iPads, and other devices in the country via third-party distributors. The company’s push into India has been part of Mr. Cook’s turnaround strategy, as he aims to target the 1.3 billion Indian citizens and exploit the inherent growth potential in the country.
This target market may be even more lucrative than China, as India’s population is relatively younger and has relatively low smartphone penetration. The country possesses a vast 4G connectivity network, unlike other emerging markets; this presents a lucrative opportunity for Apple, as it would be able to promote its latest gadgets in the region. Last year, India surpassed the US as the second-largest smartphone market, in terms of global unique active users.
Apple reported a 38% year-over-year (YoY) sales increase in India in its latest quarterly earnings; the company sold over 800,000 units in the region during the quarter ended December 31, 2015. Sales in other emerging markets had shown stagnant growth for the same period, while China experienced a comparatively lower growth rate than India at 14%. Sales volume for the iPhone alone experienced 76% growth in India, compared to 45% in the Middle East, South Korea, and Africa, 18% in China, and 20% in Europe. Moreover, the India’s population has a median age of 27 years, as opposed to China, where the median age is 37 years.
Such high-growth numbers indicate that now may be the perfect time for Apple to open its famed single-brand retail stores in India. Apple Stores are known for their distinctive setup, excellent customer experience, and strong brand association, which is known to deliver superior products. Such a setup is likely to attract the country’s youth, who helped raise India’s smartphone sales by 23% to 220 million in 2015.
A major roadblock to Apple’s business, however, comes in the shape of local smartphone makers and other cheaper brands, as the country has a relatively lower income-scale than most of Apple’s other markets. But the tech giant has so far successfully weaved past this issue by enforcing aggressive price cuts on some of its older devices, such as the iPhone 5s. Even the iPhone 6s/6s Plus models were sold under various discount packages, and this pricing flexibility helped increase product availability across all third-party distributors.
With the company reporting stagnant growth in global smartphone sales in its earnings release, due to increasing consumer product upgrade lifecycles, India may just be the bailout it seeks. The company aims to turn around faltering handset sales with the new iPhone 7. Establishing stores in major population centers such as Delhi and Mumbai can help it attain greater traction when the smartphone launches.
