Does India Exist for Apple?

Berges Malu / March 5th, 2014

India is considered to be the next big superpower and second largest market for smartphones. It is a country Apple often ignores in their giant plans to get iOS to concur the smart phone world. Sure, bureaucratic hurdles do exist, and Tim Cook has pointed those out on prior earning calls, but while every other tech giant has managed to clear them, what prevents Apple?

India is one of the world’s largest and most price conscious mobile markets. India is home to a burgeoning middle class that consists of young urban youth who are looking to buy the latest smart phones and be one amongst their peers internationally. Apple, however, doesn’t seem to see India this way. Why do I say this? Read on.

In the last two years, Apple has witnessed strong demand for its iPhones in India. Incentivized by the fact that Apple teamed up with local financial institutions and large retail chains to sell iPhones on interest-free loans and even at a slight discount to students. While this did seem like a signal that Apple was serious about entering the Indian market, their overall stance has been rather bearish.

Retail and Pricing

Apple, in India, has decided to stay away from directly entering the market to retail its products. They instead, choose distributors, who sell them at a rather high margin. This has led to poor positioning of the Apple brand in Indian retail stores, and so called Apple Premium Resellers. Few salesmen know much about the iPhone’s cool features. Many prospective buyers leave the store ending up buying either an Android or Windows mobile device. Consumers are left considering it “a more value for money proposition” simply on hardware specs.

Who wouldn’t fall for a salesman claiming a 13 Mega pixel camera (albeit with a poor lens) and a quad core processor (albeit with a slower processing speed) is better than the superior iPhone? As Benedict Evan’s rightly points out, “They don’t go into the shop and ask how new the chipset is – they look at the phone itself as a buying proposition.”

India is one of the most expensive places to purchase an iPhone. The iPhone 5s is sold at a whopping ₹53,500 or $873 for the 16GB unlocked model, while the iPhone 5c is sold at ₹42,500 or nearly $688.

The iPhone 4s is sold in a similar price band as Google’s latest Nexus 5. Think about it, a phone with technology that is nearly 2 years old is being sold for the same price as that of what many consider a top end Android device.

This has also led to many preferring to purchase their iPhones either abroad or to ask a cousin/friend traveling abroad to bring them one back. Apple, to prevent this, doesn’t service iPhones purchased in a country other than India (more on this below).

Service

Apple has outsourced the servicing and warranty fulfillment of Apple devices in India to registered third party companies referred to as Apple authorized service providers (ASP). These ASPs refuse to repair or replace an iPhone purchased outside India. Not to service your own product, only because it was purchased in a different country, is quite frankly ridiculous. Especially for mobile devices meant to be carried around. After paying nearly a $200 premium on buying that iPhone 5s in India, the service isn’t up to Apple’s famous service levels experienced internationally either. It takes a minimum of 3 days for any Apple device to be serviced/replaced.

In the US, like in most international markets that Apple services, it should be a quick process to get a new device. I was recently at the Apple store in Hong Kong, and it took me under 10 minutes to get a replacement pair of Apple EarPods.

One service technician mentioned to me that, for every replacement or repair job, the ASP requires a clearance from an Apple employee who is based either out of Singapore or the US. Often, parts are specially flown in from Singapore in order to repair Macs. Incredible isn’t it?

App Ecosystem

The App Store is a joke in India. Most apps sold in other countries aren’t available on the Indian store. Instead, the app store in India is riddled with fart apps and other junk.

Until very recently, users were also unable to purchase music and other media content from the iTunes store. Even today much of the content is still inaccessible to Indians. iTunes Radio is a feature that Indian users won’t be laying their hands on for another few years. And to talk about Apple Maps in India would be a rather cruel joke. Apple’s Maps feature set in India is rudimentary at best. Much of the data is erroneous. Cities have satellite imagery that is a good 5 to 7 years old. Transit information is simply unavailable. While Google has made large strides to provide not just transit information, but also traffic conditions, restaurant information/reviews, and more on their Maps app.

Does Apple Have a Future in India?

In a market that is said to be growing at about 15% a year, the fact that Apple seems to look at selling their iPhone in India as an after thought is just ridiculous. India is thus, not surprisingly, one of the few destinations internationally. A place where Samsung has overwhelmingly captured the higher end of the market with their Galaxy range of devices. Nexus sales are booming. According to Google’s own trends service, the interest for the Nexus 5 was the highest from India in recent months.

By treating India as a stepchild, Apple may fast lose a rather large and promising market. One that could boost lagging sales of the iPhone, shore up the Apple stock, and most importantly bring in a huge loyal customer base for the iOS ecosystem.

Meanwhile, Xiaomi has already expressed interest in the Indian market while Micromax continues to grow.

Is someone at Apple listening?

Berges Malu

Berges lives in Mumbai and currently writes for an Indian online news platform on politics and technology. His work has appeared in the WSJ-Mint and Bombay Times amongst others. When he isn’t writing, Berges is busy trying to fight noise pollution in his city. Follow Berges on Twitter
  • Glaurung-Quena

    “Apple in India has decided to stay away from directly entering the
    market to retail its products, instead choosing distributors, who sell
    them at a rather high margin.”

    If you’d done a bit of research you’d know that Apple doesn’t have much choice in the matter as far as opening Apple stores or setting up a direct sales web site for India, as Indian regulations would require them to purchase 30% of the value of their retail sales there from Indian suppliers… which is difficult since India does not have much electronics manufacturing to speak of. CF http://tinyurl.com/q977mxl.

    Since they can’t sell their products there directly, they are forced to work through resellers, who have to take a cut. Apple is always careful to structure their reseller discounts and pricing agreements so that nobody will be able to undercut Apple’s own domestic US prices. Unfortunately that means that when you add in import duties, VAT, and reseller markups, just about every country outside the US gets hit with mildly to severely higher prices for Apple’s products. The article I linked to above is a year old, but it talks about the steps Apple had been taking to improve their ability to sell in India.

    • Brian M. Monroe

      I have read the same thing elsewhere. You are spot on. I do not think it is Apple in that is bad but the Indian government that does not see the value of allowing outside brands in on a level playing field. If anything, I can hope that as Apple has been able to get the Indian government to see things their way and allow Apple to do business the Apple way in India. Just like how they have done in so many other cases like Verizon, NTT DoCoMo and China Mobile.

      What really needs to happen is that people who want Apple to have 1st party support in India take up the cause and lobby their government to change the rules. This will be better for the Indian people as a whole. Sure, they may think that their current policies protect their own home grown brands but in fact they hurt their consumers as they do not allow them to have equal choice in products in the marketplace. This is not just about Apple but many other brands that I am sure would love to do business in India but are just not able to as it is to much hassle.

    • Berges

      @glaurungquena:disqus It’s precisely why, I mentioned that there were bureaucratic hurdles that needed to be crossed for Apple. That said, nothing stops Apple from providing a more streamlined aftersales service, better app eco system and other benefits to what is soon to be the world’s third largest smartphone market? Indian’s are still lapping up these phones no doubt and higher prices at that, but aren’t seeing the value behind it, that they’d otherwise see in the US or elsewhere. If the replacement process is as tedious as other brands, if the app ecosystem is broken here, and the phone launches 3 to 4 months after other countries, users are obviously going to look elsewhere, with their next phone purchase. The question then is, is Apple planning to be in India for the longer run?

      Berges

      • Kizedek

        As I understand it, the release of Apps is down to the developer. The developer checks the boxes of which National App Stores he wants his app to appear on.

        Perhaps a developer who is relying on ads or in-app purchases feels there is little value to him in adding a potentially large number of new users who may offer a little less ROI in terms of ad clicks and in-app purchases, but which would nevertheless dramatically raise his level of support and responsibility for which he wouldn’t be compensated.

    • rahul

      what is the profit margin of selling an iphone by the distributor?

  • W.I.G.

    You seem to be mostly interested in complaining about Apple’s behavior in India and don’t put much effort into trying to understand the cause of it. This comes across as whining because the company isn’t serious about your home (“treating India like a step child”). Analyzing the reasons for Apple’s policies would be much more useful.

  • PeterMillard

    “The iPhone 5s is sold at a whopping ₹53,500 or $873 for the 16GB unlocked model…”

    That’s still cheaper than buying in the UK 🙁

  • GlennC777

    I feel the need to make a general comment that some of these articles appearing on TechPinions really, really need some serious editing. The quantities of grammatical errors, mis-spellings and the like are becoming astonishingly high, and a good lesson could be learned from George Orwell: fewer, clearer words; more ideas.

    TechPinions often has interesting commentary but the level of polish in the writing is becoming abysmal. No offense to the writers, but before something is published professionally somebody needs to make sure it meets basic standards of quality.

    • Bill Smith

      I’ve complained about the need for an editor profusely, but TechPinions seems to insist on having writers edit themselves. Some of the articles I’ve read here gave me a headache by the third paragraph.

      It’s unfortunate that the owners don’t understand that the time spent reprocessing poorly written material is precious. I love TechPinions, both the concept and the execution of it, with that sole exception. I don’t like wading through noise unnecessarily.

      My only hope, it seems, is to convince more people to become paying subscribers and hope that, at some point, they’ll hire an intern. If there were a comparable site, at 4x the cost, I would abandon ship. In fact, I’ve encouraged them to raise the subscription price, but hire a bloody editor. An energetic sixth grader could contribute heavily to this site, and we would all benefit.

      • benbajarin

        Thanks for the points Bill. This is a priority for us and perhaps we can put a few more processes in place that can hopefully address some of these issues to a degree.

        I am hoping to get an intern this summer at the very least as that seems like something feasible.

        Thanks again for your support.

        • Bill Smith

          This is very good news.

          And Ben, I’ve added “The Information” to my list of subscriptions. At $300/year, it is has neither the quantity nor the quality nor the responsive forum of TechPinions.

          I’m sure you have your reasons for pricing subscriptions at $50. Can I talk you into doing a $100 premium subscription that includes a transcript of a quarterly podcast of your headline columnists discussing the industry? Surely I’m not the only one who recognizes the value of what you’ve put together here.

      • steve_wildstrom

        Bill, I share your pain. We are trying to work out some better editing solutions. In the meantime, let me ask you this. Anything that doesn’t work, anything you think needs fixing–let me know. Post comments, send email (steve@wildstrom.com or steve@techpinions.com). Whatever. I am anxious to help, both with my own material and the contributions of others.

        • Bill Smith

          Steve, if I see something particularly egregious, I will certainly slip you a note. I am both, not surprised that you and Ben are on the ball, and, thrilled that an editing intern is forthcoming.

          On the flip side, by the time I get around to reading an article, many others will have already been through it. Also, I’m not the only one who wants you well, my friend, not burning the midnight oil doing editing. If it’s a matter of you acting on my gripe about a grammar faux pas or you taking a nap that helps you get better, I choose the latter. One shouldn’t use a Bentley to move furniture.

    • benbajarin

      I apologize. We have chosen to take the high road and not chase page views, or even raise capital but boot strap the site ourselves. As you can imagine the publishing business is not an easy one and none of us are full time as we all have other jobs. I will take this into consideration and see what can be done even with where we are at today as a company.

      Hiring an editor is a high priority for us just not one we can afford at this point of the company. I’m hoping for an intern this summer.

      Thanks again for having patience with our small startup.

      • GlennC777

        Thanks for the reply. I don’t blame the writers themselves, especially if English may not be their first language, but having lots of errors in published articles is a bit like leaving the house with your fly unzipped. Some people might not notice, but to the ones that do it looks pretty foolish. I really have no idea what kind of operation TechPinions is, how many people, whether it’s thriving or struggling, but it wouldn’t hurt to put a little effort into a bit more editorial polish. The more you get noticed, the more it will matter.

      • jfutral

        Well, I know I do my best editing after I hit “send”.

        Joe

    • recision

      I barely got passed the first sentence – concur – I mean seriously…
      And I definitely couldn’t make it to the end of the article.
      I agree, there are some great articles come through here, but all the contributors have made their fair share of… lets call them – typo’s.

      • benbajarin

        Ran it through some grammar editors. Let me know if this version is better. Will help me refine a process until we can afford an editor.

        • recision

          Try “conquer”.
          And I will restrain my grammer-nazi at that… 😉
          (btw Ben – really appreciate all your hard work here)

  • SK

    Couple of different points. (1) Folks, you do know that even though India has one of the largest English speaking population in the world, it is not its native language. So stop picking on the writing bit. This platform is not about professional writing. Although i agree that an editor can make a difference. (2) To those who are pointing the finger at the Indian regulatory environment, you are right – partially. The other part of the problem is that Apple takes no overt – visible steps to at least convey to Indian consumers that it is interested in the Indian market. Perhaps it has engaged with the authorities but people don’t know about it as opposed to folks knowing about its engagement with players in the Chinese market – public and private. So it may take time for Indian market to be to Apple’s liking but the company needs to at least engage and show that its working to make it better. (PS, there may be some grammatical or otherwise mistakes in my post – please do excuse.)

  • Bruce_Mc

    I can think of two reasons for Apple’s strategy.

    How many of the “other tech giants” operating in India are making a profit there? How many local tech firms are making good profits? I have read that in the phone business in India, competition is fierce and profits are low. Apple makes good money selling phones. If they can’t make good money, they won’t enter the market.

    Apple can only grow so fast. They have been making as many phones as they possibly can more or less continuously since the first iPhone was released. Each year the number of phones made has grown tremendously. This year Apple signed up the biggest carrier in China and the biggest carrier in Japan, both for the first time. No doubt Apple will have trouble keeping up with iPhone demand for the next year or two.

    After making phones for China becomes normal for Apple I expect them to reach out to another large country or region. That might be India. It might be South America, or even Africa. Apple will look at the opportunities and the work involved and make a decision.

    • Berges

      @Bruce_Mc:disqus – While competition is fierce, Apple still makes a tidy profit with their phones. I don’t believe any tech company operating in India and selling their wares here is currently making a loss. Profit margins are rather decent. It’s the fact that Apple, even after selling their phone at such a high cost, does not provide the entire Apple suite of conveniences, great after sales service, complete App Ecosystem etc, that could lead to their downfall in the longer term, as users will instead move elsewhere to other brands. – Berges

      • capnbob67

        You have no idea what profit Apple makes in India (nor do I) but my guess is that is lower than markets where they more closely manage price and distribution. Given how viciously the markets hit Apple for every point of gross margin decline, even selling any largish number of iPhones in India would be a negative if it dropped the average GM. Pumping money into service, app store management, major Indian content licensing deals, etc. would also reduce GM without driving sufficiently profitable sales.

        It is a tricky puzzle to solve and probably not the best use of Apple’s scarce resources right now. I doubt that Apple is particularly worried about existing market share in India (or Russia). As it has shown, Apple wins when it gets what it wants even when it enters late (see Japan/China). When it doesn’t, it isn’t as interested in playing.

  • My “conspiracy theory” is that after visiting India in youth and seeing what is going on, Steve Jobs did not like India and his dislike for India is carrying over in current management.

    Please do not pile on me like wolves, it is just a “conspiracy theory” and there are many podcasts in USA which have stranger theories than mine.

    • vikram333

      Quite the contrary, Jobs has spoken fondly about his trip to India and has said several times of the valuable lessons that he took from there, most notably the importance of using intuition, which he learned from people that he met there.

  • Bhaskar

    It is not always Apple’s or a business owner’s problem to fix the ridiculous distribution system or FDI policy of a country. It does cost a lot to buy an iPhone in India but our 2G network does not even attract a real smartphone user! I bought an iMac in 2012 for INR 64900 but the same computer now costs INR 99900! Why? Because of the dubious import tax increase coupled with ever decreasing currency value. India government has ambitious plans to give away tablets and mobile phones for less than INR 5000. So it makes no sense for Apple to bang their head to this country and bleed. Let them play safe, they are more than good enough in what they do.

  • aardman

    Apple, right now, probably has easier and plumper nuts to crack than the Indian market. From everything I read, India is one big bureaucratic nightmare. Given the segment of the market Apple plays in i.e. the luxury end of the first world consumer space, Apple most likely decided that, for now, India is not worth the effort. Please don’t take it personally, it’s a business decision.

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