Apple’s Struggles in India

I’ve been studying the Indian smartphone market for many years now, watching it closely as it grew into the worlds fastest smartphone market. It was only a matter of time until India became the second largest smartphone market since the size of the country is second only to China. However, these two markets could not be any more different.

Even before Apple started their rocket ship run in China, any behavioral researcher worth their salt knew Apple was remarkably well positioned for China. While I don’t like positioning Apple as a luxury brand, because they aren’t, they do experience luxury like psychology buying when it comes to the Chinese market. In case you have not dug into this dynamic, Ben Thompson wrote a foundational post on the topic a few years ago where he explains the iPhone as a Veblen good in China. In the case of China, understanding why it has always been a strong market for luxury goods informs us why China was always and will still be well positioned there.

India, at least right now, is the polar opposite. The Indian market is not as attracted to lavish luxury. Where the Chinese look for lavish luxury goods and brands to help them appear of status Indian culture centers more on value. In studying the Indian market, it was eye-opening as locals explained to me the difference in mindset by making it clear their culture views you more highly if you get a deal not if you willingly overpay for something you could have received at a better price. This is the root of Apple’s challenge.

Even in China, the iPhone is not viewed as the best product for value for the money. Many brand research studies I’ve seen on this dynamic in China have the iPhone near the bottom of smartphone brands for the best value for the money category. Again, this is not surprising if you only look at specs on paper as the equation of value. However, we know in China there is value placed on brand, having the “best,” and status, and those more invisible equations are why Apple succeeds in the market even if on paper it looks like they shouldn’t.

However, in India, there is value placed on getting a deal and an even higher value placed on getting the most bang for your buck. A dynamic that Apple is not well positioned for with Indian consumers. Many of those invisible equations that factor into the buying decision don’t exist in India and more of the on-paper things like specs, overall features, and price factor more to Indian consumers.

Samsung vs. Apple. vs. Xiaomi
Samsung has long been the king in India. Well, I take that back, Nokia was the king, then Samsung and now Samsung is in a dogfight with Xiaomi.

A research partner of ours, GWI, does a quarterly survey asking consumers which devices they currently own and have been tracking model ownership since 2009. Below is the chart, showing the mix of ownership trends since 2009.

As the chart shows, the shift from feature phones to smartphones benefitted Samsung the most. While they still have the dominant stare of brand installed base in India they are in a quarterly flip-flop with Xiaomi. Some quarters Samsung sells more smartphones in India than Xiaomi, and other quarters Xiaomi is on top. Also looking at the chart, for most of 2016 and 2017 Apple was the second most owned brand in India. Micromax, a local Indian manufacturer, had a brief rise and challenged Samsung in a few quarters for the top sales spot by quarter but faded the past few years.

The real story in India has been Xiaomi. With fading sales in China, and not being able to break into the premium tier there, Xiaomi set their sights on India and has found a near perfect market fit. Xiaomi was always the value play in China. However, as discussed, China is less a value market and moving more toward a premium market which did not play well for Xiaomi. In looking at how Xiaomi has positioned itself through the years, they are much better positioned for India than they ever were from China.

As the tracking data is showing, Xiaomi is growing their installed base and has overtaken Apple as the second most owned smartphone brand in China, and I expect their lead over Apple to grow for the next several years due to their alignment with India’s desire for products that are considered value for the money.

Can Apple Grow?
This is the real question, and one very hard to answer. Apple’s thesis for India is as more Indian consumers increase in economic status that at some point they will see the value in Apple’s offering and be willing to pay a bit more for Apple’s innovations. While this is a fine thesis, it is the extremely long view. Moreover, when I say long, I mean looonnnnggggg. My worry is by the time the Indian market starts to move in a direction that is positive for Apple that we will be passed the smartphone era and already onto what is next.

Apple’s ecosystem is not as strong in India, which means the decision process is more on specs and features than the total package. Apple also has to deal with Indian government politics and a steep 20% import fee which makes they cost of iPhones seem even more out of reach for Indian consumers.

Apple’s goal is to work to make iPhones locally in India to help bring down the tariff and open more stores in the hopes they can better sell the value of their products. However, the real challenge for Apple’s business in India is to cater to the value for the money mindset. Somehow, Apple must crack this and figure out how to position the iPhone’s innovations as value propositions worth paying a bit of a premium for. This is the challenge and the opportunity, but it indeed suggests Apple may need to continue to do unique and exclusive things for the Indian market. This is not usually a part of Apple’s playbook. Apple, generally, likes to keep their product and services offering consistent from country to country but increasingly I feel they are learning for markets like China and India they need to adapt and localize their offering if they want to compete.

I know Apple is long for India and they can be patient. However, if their strategy takes too long, I’m worried the market will be so entrenched and deep in Google’s ecosystem it will make it very hard, and not desirable for the customer to switch platforms. So while I advocate Apple being patient, it would be a mistake to get too comfortable being patient.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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