AAPL and India iPhone Growth
Apple, AAPL, has long term plans to get more iPhones sold in India through localization, exclusive franchise stores and online retail.
One of the important lessons to learn in investing and stock trading is, understanding the strength of a company’s management based on its strategies and decisions. How companies deal with new markets is probably an indication of how strong its management is.
India has always been a complex market for technology and automobiles. The demands of consumers here are unique, and they have lower priced products available that offer more or less the same technology as their higher priced competitors. General Motors ($GM) won’t be selling cars in India after 2017, since it hasn’t managed to attain the sales growth to justify its existence in the country in a profitable manner after nearly 20 years of trying.
iPhone Sales Aren’t Quite Kicking Off in India
Apple (AAPL) has struggled to improve its iPhone sales in India, despite the country being the fastest-growing smartphone market in the world. Though the company had set a sales target of 10 million iPhones in the country in the last fiscal year, it could only sell 2 million units. With Indian consumers having so many smartphone models from various Chinese manufacturers to choose from, and these providing advanced features at extremely cost-effective prices, Apple had to think outside the box if it wanted to make a significant impression in India’s smartphone market.
AAPL – Apple’s Retail Plans
It didn’t take rocket science for Apple to figure this out. It had to make its iPhones cheaper to get the general public to buy them. With 80% of smartphones in India sold at $150 or below, according to Bloomberg, Apple realized it needed to price down its iPhones significantly. Sure enough, online retailers were offering the iPhone 5S, which was launched back in 2013, for just $248 and the 2016-launched iPhone SE, with more features, at around $340, based on the present exchange rates. Contrasting that is the cheapest iPhone sold in the US, the iPhone SE sold for $399. The iPhone 6 is retailing at around $400 in India and the iPhone 6S at $560.
Another strategy Apple is applying is selling older generation iPhones. These can be sold at much lower prices while people get the satisfaction of owning a smartphone of a reputed brand. In fact, older iPhones contributed to 55% of the shipments of the company last year in India according to a study by Counterpoint Research and quoted by Bloomberg Businessweek. Samsung is following a similar strategy.
This strategy could certainly be the winning one in the long term as people buying these lower priced older iPhones could eventually want to buy more expensive and contemporary iPhones in the future, once they have experienced owning an iPhone. Samsung is focusing on various price points and it has resulted in its share of the high-end smartphone market in India rising to around 48%, with its latest Galaxy S8 proving especially popular, with 80,000 pre-orders.
Exclusive India Online Stores
Apple also has other elements to its strategy. It has recently launched over 100 franchised stores in the country for providing prospective consumers with the Apple shopping experience. It is planning further retail expansion too. But a crucial development is that it is starting to manufacture iPhones in India. Localized production can help reduce costs further. By the end of 2017, $AAPL is planning to launch an online store exclusively for Indian consumers where these India-made iPhones can be sold without having to meet any regulatory approval as required for a physical store.
AAPL definitely has chalked out a plan for long term success in India. Being the complex and competitive market the country is, it isn’t surprising that the global trends do not always reflect here. But when the going gets tough, the tough get going. Trade $AAPL and all other large cap tech stocks commission free at TradeZero.