Apple is fighting for a share of the potentially huge Indian smart phone market using a novel strategy. They’re releasing older model iPhones, which are affordable in India and which seem to be proving a hit with the locals. It’s not the first time Apple have come up with a great idea which makes a bag of money and we shouldn’t be surprised !
One of the most popular iPhones to hit the Indian market is the iPhone 5S, which was released in 2013. Such is the speed at which (smart) phones evolve, in the more affluent western countries of North America, Western Europe, Japan and Australasia, people have tried it, used it and finished with it. As these people upgrade their devices to more recent iPhone versions, something has to happen to the hardware.
eBay is often the first port of call for many as we reported in our article on second hand phones. Where Apple can get their hands on the old devices, however, Apple are refurbishing them and sending them on to India. From the user’s point of view, this all makes a lot of sense. Tying together an outright purchase of a handset with a SIM – especially if it’s second hand – is one of the smartest ways to be more efficient with your spend..
The sort of people who are keen on buying an Apple iPhone in India, rather than an Android device, are young to middle aged professionals. Remember, however, while they might well have the same appetite for up to date gadgetry, they don’t necessarily have the same disposable income as their equivalents in the west. This is where the interest in still attractive older model iPhones like the 5S is coming from.
Unfortunately, there is a fly in the ointment. The Indian government prohibits the importation of second hand electronic devices on environmental grounds. That means that even an Indian professional is looking to spend about a month’s salary on a smart phone together with plans and extras. Only cheap devices will be successful in this market.
The competition is from cheaper, Chinese phones
Pushing its ‘retro’ iPhone models ( in what other industry would you describe a 2 year old product as ‘retro’ ?! ) is not something that Apple is used to. The reality is, they’d probably feel better about selling everyone a new iPhone. However, the competition with cheaper rivals makes this sort of approach a necessity if Apple is to retain any foothold in the market. As things stand, Apple has only managed to grab around 3% of the Indian market.
Most people are buying locally made products like Androids manufactured by Micromax Informatics as well as devices made in China by Oppo, Gionee and, biggest of the lot, Xiaomi. Most handset sales come from these cheaper models : Chinese made Android smart phones. These relatively low cost products have taken the lion’s share of the Indian market, up until now. Breathing down Apple’s necks is Chinese smart phone manufacturer Xiaomi, which is aggressively pursuing the Indian market with its own Android phones. Co-founder Lei Jun says that the company is to double its investment in India over the next two years to balance declining sales in China.
There is, however still a place for the iconic Apple models, as long as they’re at the right price ! Apple is certainly not ignoring the potential of India as a destination for its products. The nation is young, increasingly tech savvy and huge in population. Indians outnumber every other nation’s population with the exception of China itself.
iPhone sales by online retailers
Apple has indicated it’s willingness to support this new approach by allowing online retailers sell the iPhones they’re provided at discounted prices. Amazon, iPlanet and Flipkart are selling the iPhone5S, for instance, for around US$300. That’s a saving of around 25% off a similar iPhone model, the SE which retails in the States for $400 ex state sales tax.
Apple, is adapting to the same trends that some of the Chinese manufacturers have identified. Both sides are looking to India to take up some of the slack in the Chinese market, which is showing a bit of a slowdown. Of the 2.6 million iPhones that Apple shipped to the subcontinent last year, 55% of them were older model phones.
Negotiating with the Indian government isn’t straightforward
Apple’s CEO is trying to convince the government to loosen restrictions on direct imports from Apple rather than having to rely on middlemen. He is not having much luck. India would like to increase its share of local smart phone manufacturing capability. They’ve also requested would like to see Apple come up with a better plan for job creation and capital spending. It’s a solid plan. If Apple could start to manufacture components in India, it might be a way it can get around relatively high import taxes. This would certainly bring the price of new Apple iPhones down – a boon for both sides.
One way that Apple’s Indian sales pitch is trying is to make it easier for young Indians to buy their phones over a longer period together with attractive phone plans, buy back schemes and product exchanges. They have hired a number of “affordability managers” who are negotiating with finance companies to make phone purchases easier.
Bringing it all together
Apple is looking to the emerging market in India to sell its products. The opportunity is potentially huge, it just involves Apple having to adapt its usual elitist marketing. Being flexible is not a feature the Apple brand is renowned for. Indians do want to buy iPhones. They just can’t necessarily afford them the way that young people in the west can. It appears Apple’s strategy is a worthwhile one. Experimenting with selling older model phones, using online retailers and moving into local assembly and manufacturing to ward off competition from China is, perhaps the only way they will break the market.