Apple plans to go local with a vengeance, setting up small, neighbourhood shops in big cities and tier II markets, in a bid to get closer to potential buyers as it pushes ahead with an India-specific strategy aimed at trying to grab market share from dominant rival Samsung.
The shops will be set up by Apple distributors Redington and Ingram Micro besides existing trade partners and follows the revival of theiPhone 4 for sale in India and other emerging markets, which gave buyers who covet the brand the option of a phone that costs much less than latest models. Apple has also directly approached some trade partners and retailers regarding the setting up of the neighbourhood stores.
Samsung is widely present in the Indian retail market place, offering smartphone and tablets through more than 1,000 Smartphone Cafes. Apple is late to the game, only having seriously focused on India in the last two years but having since then given the local management a freer hand. Apple India has sought to push phones and tablets through exchange and finance programmes, besides reintroducing the iPhone 4, which is defunct elsewhere.
The company has also reintroduced the iPhone 4, which is defunct elsewhere.
Apple has informed distributors and trade partners in recent meetings that it is looking to set up exclusive 400-600 sq ft stores in neighbourhoods and some popular high-street locations. They will focus on mobility products such as iPhones and iPads, besides entry-level Mac computers and iPods, said three of Apple’s trade partners aware of the plans.
“Apple wants to focus more on its entry-level models in these stores such as iPhone 4, iPhone 4s, iPad mini and iPad 2, which are essentially in the sub- 30,000 segment and also its largest-selling products in India,” said a senior executive of a leading trade partner of Apple.
“The company feels these products are also attractively priced over competitors such as Samsung and Sony, and hence, being closer to the consumer will help to increase the conversion rate,” he said.
Apple wants to set up these smaller stores in areas where people have high disposable incomes, there’s a strong penetration of smartphones and a large student population such as Pune, Vizag, Guwahati, Durgapur and Gangtok. Apple has not set any expansion target for the small-format stores.
Apple declined to comment on queries regarding the plan. “We wouldn’t comment on rumours or speculation,” said Apple spokesman Alan Hely at regional headquarters in London.
The company has reached out to existing trade partners and multi-brand retail chains with its small-format store proposal, said the people cited above.
One of Apple’s premium resellers, Currents Technology Retail, recently set up two such stores in Kolkata and Panchkula in Haryana. Currents is distributor Redington’s own retail format.
Not all partners are enthused by the plan. One leading electronics retail chain decided not to take up the offer as profit margins on Apple are already among the lowest.
“After offering consumer discounts, the margin on iPhones and iPads is 2-5%, whereas it’s 7-10% for Samsung and other brands. Hence, it makes sense to continue with a multi-brand retail model where we can make more money,” said a senior executive at the retail chain.
An executive with another trade partner said Apple’s distributors want to ensure that the format will be viable, which could mean that the plan unfolds slowly.
Apple had around 2% volume market share of the Indian smartphone market in the October-December 2013 quarter, far behind market leader Samsung at 32% share and Micromax at 21%, according to market tracker Canalys. Apple’s value share, however, is higher due to the price of its phones, with the iPhone 5c starting at 41,900. That’s why reintroducing the iPhone 4, at a price that could go as low as 21,000, made sense for India.
Thanks to its marketing push, Apple India’s 2012-13 revenue rose to 3,030 crore from 2,003 crore in the year earlier. But that lags considerably behind Samsung India’s 27,000-crore revenue, although this includes television and home appliance sales as well. Samsung India’s mobile phone and tablet business is estimated to account for around 55% of total sales.
Apple wants to make sure that it doesn’t miss out on a burgeoning market.