Hey guys it’s Greg with Apple Explained and today we’re going to be exploring all
the challenges Apple has been facing in India.
Because Apple had some ambitious plans to grow their revenue in the region from one
billion in 2015 to 5 billion in 2020.
But this has proven difficult to achieve.
Because in 2018 Apple failed to meet their revenue target of four billion, only managing
to generate 1.8 billion from the country.
And there are a few reason for this that I’ll cover in the video.
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Now it’s always been challenging for Apple to break into the Indian market, and it’s
no different with the iPhone.
So let’s start with one of the biggest reasons why, and that’s its high price.
And if you’re in America you’re probably thinking yeah the iPhone is expensive here
too.
But it’s actually even more pricy in India, since the country adds a 20% tariff on foreign-made
smartphones which means the starting price of an iPhone XS is over $1,400.
And considering 95% of all smartphones in India cost less than $500, this puts Apple’s
flagship phones in the ultra-premium category.
In fact, the ever increasing prices of flagship iPhones in India have caused a gray market
to develop.
Where customers will fly to Dubai, purchase an iPhone XS, come back, and saves hundreds
of dollars compared to buying the phone it in India.
In fact, in 2018, a man was arrested for trying to smuggle 100 iPhone X’s into India from
Dubai, worth about $120,000.
And despite Tim Cook actually visiting India back in 2016 seeking tariff reductions, the
government has only made it more expensive for Apple to sell to customers in India.
Now you also have to keep in mind the average salary in the region, which is about $1,670
a year.
And this may sound ridiculously low, but the purchasing power of an Indian Rupee is much
higher than the conversion rate suggests.
But it still isn’t enough for many people in India to buy a smartphone.
Since only about 25% of the population actually has one.
And that’s a big reason why Apple wants in on the Indian market so badly, it’s one
of the few regions today that isn’t experiencing smartphone saturation.
But like I said before, their plan hasn’t been going so well.
The iPhone currently accounts for just one percent of the smartphone market in India.
Down from two percent in 2017.
And if that wasn’t enough, Apple’s India team has been collapsing.
Because in 2018 the team lost three executives, the chief of national sales and distribution,
the head of its commercial channels and mid-market business, and the head of telecom carrier
sales.
And because of these departures, Apple’s Indian sales team had to be reorganized.
But not much could be done to overcome India’s harsh tariffs.
The country is trying to force more companies to manufacture domestically to help employ
their large population and boost their economy.
And although this strategy is controversial, it has paid off for the country in a few ways.
It resulted in Samsung and Xiaomi setting up factories in the region, and Apple has
actually contracted a Taiwanese manufacturer to assemble the iPhone SE and 6S in India.
But the company never made a move to build their higher end XS and XR models until very
recently.
Because Apple executives plan on meeting the Indian Commerce Minister at the World Economic
Summit later this month.
So we’ll have to wait and see if they come to any agreements.
Now you might be thinking, if the iPhone isn’t popular in India, then what smartphone is?
Well, Xiaomi’s Mi phones have the largest slice of India’s smartphone marketshare,
at about 31%, with Samsung coming in second.
And it isn’t hard to figure out why, since customers in India can get their hands on
the Xiaomi Redmi 5A for just $100.
That’s a fourteenth of the iPhone XS’s price.
In fact, a manager of a local smartphone store in India said that the average budget of his
shoppers was about 10,000 rupees, or $150.
But Apple’s lowest priced iPhone model, the SE, cost almost twice as much.
So it’s clear that Apple needs to focus on providing affordable smartphones to stand
any chance in India.
But this is about more than just the iPhone’s high price.
Because if you actually go to Apple’s India website, you’ll notice a strange category
in the header titled “Where To Buy.”
Which is where the company sends you every time you try to purchase something from their
website.
And this brings me to another huge problem.
There’re no Apple Stores in India, retail or online.
only authorized resellers.
So that means it’s impossible to buy directly from Apple if you live in India.
And if you know some Apple history then this probably sounds like the Macintosh all over
again.
Because before there were Apple Stores, Mac computers were sold alongside cheaper PCs
in places like CompUSA, and the salespeople weren’t educated about what the Mac could
do or the advantages it had over other machines.
So PCs were almost always recommended to customers, which negatively impacted Macintosh sales.
But once Apple started building their own stores, they were able to supply the product
knowledge and retail experience needed to promote sales of their products.
And I think we might be seeing history repeat itself when it comes to the state of Apple
retail in India.
In fact, Apple is applying the same store-within-a-store model to smartphone retailers in the region,
with specially trained staff to help sell their iPhones.
But this may not be enough, since Apple can’t offer other valuable retail services like
Genius Bar technical support and Today At Apple sessions that they do in other countries.
And there are some major inconveniences that come with being in a country with no official
Apple support.
Because although Apple authorized service centers exist, they aren’t required to honor
any of Apple’s repair or replacement programs.
For example, when the iPhone battery replacement program was going on, there were customers
in India waiting almost an hour at authorized service centers to get their iPhone batteries
replaced.
But many of them were told their particular model wasn’t cover under the program, even
though Apple support told them it was.
So customers were forced to visit different service centers in order to find one that
would actually perform the battery replacement.
Now if you take a step back and look at the entire experience of owning an iPhone XS in
India, you begin to understand why it doesn’t make sense for most customers.
Because you’re spending more on a smartphone that receives less quality customer support
than virtually any other country on earth.
And that isn’t even considering the features that aren’t supported, which I’ll get
to later in the video.
And that’s exactly how India wants it to be.
Because if you aren’t supporting their citizens or their economy, they don’t want you to
be successful in their country.
So it’s no surprise that 96% of smartphones sold in the region in 2018 were manufactured
in India.
And if you’re wondering why Apple doesn’t just start building their own retail stores
in India, it’s because they’re limited by government restrictions that require foreign
retailers to buy at least 30% of their manufacturing materials from Indian vendors.
But since Apple buys most of their components from other places in Asia, they don’t meet
the requirements to build retail stores in India.
Now Apple initially hoped to turn this around by convincing the government to exempt them
from these restrictions if they promised to manufacture in region at some point in the
near future, but they refused.
So it appears the only way Apple can bring their stores to India is to establish a large
manufacturing presence in the region and source as many materials locally as possible.
But this would be a huge investment in money and resources from Apple, since they’re
not entirely sure what kind of return to expect.
Because even if they are able to avoid India’s smartphone tariff, it likely won’t lower
the iPhone’s price enough to encourage significantly higher sales.
So some people think Apple should create a super budget smartphone that would be manufactured
and sold exclusively in markets with lower price points.
But what kind of smartphone would these budget customers want?
Well, let’s start by taking a look at the best selling iPhone in India today.
And it’s not the SE or 6s, it’s actually the 6.
Apple unofficially relaunched the iPhone 6 in India and China back in 2017 at a price
of about $400.
And although the technology is over four years old, it’s the only iPhone in India price
below $500 with a larger screen.
And that’s the feature that made it so much more popular than the smaller and often cheaper
SE, despite the fact that you can’t even find it on Apple’s India website.
But there’s more Apple needs to consider than simply hardware.
Because some of their software features are either useless or don’t exist in India.
For example, Apple Maps doesn’t support navigation and is missing even the most basic
points of interest in the country’s major cities.
Siri still struggles to understand Indian accents, and it can’t give you any information
about local restaurants or movie theaters.
And Apple Pay has never launched in India despite Samsung Pay being available for over
a year.
So to me, it appears Apple’s strategy in India has to be multifaceted.
They have to offer an attractive $300 phone that’s manufactured in India, but they also
need to establish a clear presence in the country with their own retails stores to provide
satisfactory customer support.
And if they don’t have all their major software features working well in the country, it’ll
give their competition the opportunity to make a more useful and appealing device.
Now all of that is much easier said than done.
And it’s going to take years of strategic planning to succeed in the Indian market.
But I think there’s definitely a path for Apple to finally become a major player in
India.
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Alright guys so that’s Apple’s India Problem, and if you want to vote for the next video
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Thanks for watching, and I’ll see you next time.