Apple changes sales tactics as the iPhone’s share in India plummets to new lows

By , Oct 18, 2012

I’ve previously written about Apple’s woes in India, where the company was forced to re-price the iPhone 3GS because cheap Android handsets took the market by storm. It’s really the same problem plaguing Apple in any other country, only it’s way more pronounced in India, a 1.24 billion people market that buys 220 million handsets per year.

India is also home to the largest concentration of people living below the World Bank’s international poverty line of $1.25 per day. It doesn’t take a genius to figure out that Apple’s exorbitant pricing model in India couldn’t fly with the vast majority of would-be buyers who simply cannot afford an iPhone at Apple’s terms of business…

Firstly, Apple sells iPhones in India at full price because carriers there are reluctant to cough up billions in upfront subsidies. This means the iPhone is prohibitively expensive for pretty much everyone, but the wealthiest.

And the iPhone 5 is expected to be priced from 45,000-50,000 rupees, or more than $850. The entry-level iPhone 4 is a 26,500 rupees value in India, translating to about $500.

Average income in India is about a thousand bucks per year.

It’s been estimated that the average income of a person living in an urban area may be up to four times higher than that of a person living in a rural area.

Carrier Aircel eased the pain by a reverse subsidy model where you pay the price of the phone upfront but you get monthly discounts for the 24 months or your bill, which can end up getting you the iPhone 4 for free.

But these plans come at a price and no matter how one looks at it, the iPhone is astronomically expensive in India. As a result, Apple’s market share in India, according to IDC, was only 1.2 percent of all handset sales during the second quarter of this year, half the level a year earlier.

Samsung?

A cool 51 percent.

Apple lacks retail presence in India due to complicated local regulations and carriers only sell the iPhone in metropolitan areas. However, as reported by The Wall Street Journal, Apple is now changing tactics and bringing iPhone to as many retailers in the country as possible:

Now, Apple is looking to change the way it distributes the phone. A person who has knowledge of the plans says Apple will begin selling the iPhone through specialized distribution companies in an attempt to reach a wider audience, especially Indians who live in thousands of smaller towns.

This includes U.S.-based distributor Ingram Micro and India’s Redington, both of which distributed the iPad and other Apple products in the past.

Tim Cook said back in July that India’s multilayer distribution “really adds to the cost of getting products to market”. But as Apple works with distributors who have their own markup, Cook clearly has realized that Apple must give up some of its hefty margins on iPhones in India to avoid getting slaughtered by competition.

Good.

While you’re at it, Mr. Cook, how about doing the same in Brazil and tone down Apple’s arrogance in places like Russia?

This way or another, Apple will find out that a big portion of the next billion smartphone customers will come from emerging markets and these guys are going to be much more price sensitive than the first billion.

A handy breakdown of iPhone 5 pricing across 25 localized Apple Stores reveals Apple has slightly upped the prices of contract-free iPhone 5 in various countries around the world.


Click to enlarge

Per ongoing rumors, Apple is also looking to expand its retail presence in India and is believed to be launching the iPhone 5 in the country next Friday, October 26.

Android devices grew over 500 percent year-over-year in Brazil, India, Tailand and Indonesia so here’s to hoping that Apple will also apply its new approach to India to these markets as well.

Apple must realize that folks in emerging markets simply cannot afford to spend a month’s pay to get a prepaid iPhone. There are signs that Apple is starting to take the pre-paid market seriously.

However, until a person can waltz inside a carrier store and buy an unlocked iPhone at a reasonable price, Apple will continue to trail behind Android.

I’m aware this  know this may not be of particular interest to our U.S. readers who are already dealing with plenty of First World Problems.

But consider this: as the remaining 50 percent of feature and dumb phone owners upgrade to their first smartphone, guess which device a person in India will opt for – a sub-$100 dual-sim Android cheapo or a nearly $900 unlocked iPhone 4S?

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  • http://www.facebook.com/profile.php?id=1328808990 Bhuvan Kalra

    Seriously! Here in India an iPhone 4S costs as much as a Yamaha FZ-16. The 32 gig model is for 64,000 and the bike is for 70,000.

    and this thing SUCKS! :/

    • http://twitter.com/adhithyagokul Adhithya Gokul

      I think you have wrong info. The price of iPhone 4S 32 GB is around 45000. It’s expensive yes but not 64000 though

      • http://twitter.com/adhithyagokul Adhithya Gokul

        Why the hell do you down vote me ?? For saying the price of 4s in India . Sigh

      • http://www.facebook.com/friendlyraaj Rajkumar Ramadoss

        Down vote for wrong information???

      • http://twitter.com/adhithyagokul Adhithya Gokul

        It’s not fuckin wrong info. I bought one and I so I know it for sure

      • http://www.facebook.com/friendlyraaj Rajkumar Ramadoss

        I bought one too for 25K from eBay with one year international warranty.

      • http://www.facebook.com/profile.php?id=1678029491 Farrii Khan

        16 gig iphone 4s for 38500

      • http://twitter.com/adhithyagokul Adhithya Gokul

        International warrant means its not an Indian product. I bought it with Indian warranty. I suggest you see mobile.pricedekho for latest mobile prices in India.

      • Shahenjit Singh

        iPhone 4S 16GB is for 45k. Not 32GB

    • http://www.facebook.com/friendlyraaj Rajkumar Ramadoss

      35K you get iPhone 4S 16GB, form eBay…

      • http://www.facebook.com/kiran.kapoor.5811 Kiran Kapoor

        haha buying an iPhone on Ebay… There is no such thing as international warranty for iPhone dude….. epic fail

  • http://twitter.com/adhithyagokul Adhithya Gokul

    The main thing is here in India is that iPhones cannot be purchased easily. You have to in major metropolitan cities if you have to buy one. It’s not that people don’t buy expensive phone in India but the marketing and distribution is poor for iPhones. There is also no awareness about iPhones . People buy almost equally priced Samsung phone because they think iPhones are way pricier. Do you believe people with 35000 Samsung phones look surprisingly at my iPhone 3GS which is just 18000 and ask me how I could afford it as they think any iPhone cost more than 50000. Such is the lack of awareness among people regarding iPhones . Advertising is the way to go for Apple in India. First let people know the price if iPhone with TV ads and banners.

  • Thomas

    Its not just the price. Or unawareness. In fact I don’t really think that a person who spends about INR 35k is ‘unaware’ of the existence of a phone called iPhone.

    One among the few other major factors is the fact that most of the advanced features of the iPhone aren’t supported in the region or meant for the region. For instance, Ms. Siri wouldn’t understand a damn thing what I’d say to her. And even if she did, there aren’t enough cosy Italian restaurants around for her to reply me back when I ask for the directions to one!

    • chin2793

      you are spot on, features such as siri, LTE, and many more just wouldn’t work. There are not many useful apps to use in India except the games as they are in other countries (US, Aus) like transport apps, banking, etc. Plus they just can’t make a perfect map for India, Google even hasn’t succeeded in doing that after spending about a decade. There are so many streets and each street is know by 2 or 3 names. There is no system of house numbers on streets as it is here in Australia and it would be in US, UK, etc. So these features just can’t be used. And if they don’t have anything to say, they will say ahh iPhone doesn’t have Bluetooth, so it’s not useful but they are not aware that mostly you don’t need Bluetooth with iPhone. So Unawareness and lack of useful features are the major drawbacks for iPhone in Indian market.

      • dokt00r

        i am happy using my iphone 4s now and was too with my 1st gen iphone for nearly 3 years…. lack of “useful” features u say…. agreed siri doesnt understand HINGLISH…. i just switched her off… rest all features are amazing… n about maps …. i havent had any trouble navigating routine streets…. just that stock maps is not as upto date as google’s maps…. i m afraid to upgrade to ip5 coz lte, apple maps, dont work in india…. apple can intro iphone 4, 4s at reduced prices n they’ll rule….

  • http://twitter.com/bedi_aditya Aditya bedi

    The article is great to be clear about the price of apple iphone 4S in india is equals to the price of a new laptop..
    In 36000 rupees u can buy a very gud intel i5 powered laptop.
    Apple must change their policies in order to stay on indiaZz
    More than 60 % of iphone in india are sold in a grey market which usually comes from USA OR UK..

    Apple must lower their iphones prices in order to sustain in the market..

  • CollegiateLad

    Tech writers kill me. Why are you worried about Apple’s market share in the region when even Apple isn’t? Has it not occurred to you that Apple chooses not to compete at those price points. Do you think Apple is somehow unaware that if they released a $99 iPhone, it would do really well? Does Bugatti not know that if they dropped the price of the Veyron to that of the corvette it would increase market share? With Apple’s CURRENT pricing scheme, the iPhone still rakes in 77% of global profits. Please, oh please tell me why they would reduce the price of this gadget, then? It’s a business. Profit share trumps market share.

  • http://twitter.com/bedi_aditya Aditya bedi

    Why did android flourished in india?
    Because they lowered the price of their phones..
    Where people were buying nokia (Symbian) or sony (java) platform phone and that to type phone not even touch at the same price android offered them touch screen phone with the major android operating system..
    Apple meed to understand this..
    And inorder to increase their market share they must provide a gud price to the customer

  • http://twitter.com/Fake__Hunter Fake_Hunters

    I bought the iPhone 5 64GB model @ price of 62K from singapore..for me it was fair deal i made a leap from iPhone 4 which i used by far from 2 years and still using …
    But it gonna be a tough decision for that guy who frequently changes a phone ..

  • dady king

    1 of my friend got iPhone 5 @ 60000 rs ie 1200$ unofficially .. I mean iOS users are lot here but apple loose it bz of price and delaying in launch process.

  • David Henderson

    How about selling the units for a cheaper price to the carriers? India is obviously a different market and needs a different pricing strategy. Use some of that money in the bank to cut down the prices.

  • Samantha Keri

    Indians are willing to use iPhones. but looking at thep price, they just opt for Android. they are pissed off with ANdroid bt they have no other options.
    Pls deliver my msg to Tim Cook, Jeff

  • http://www.facebook.com/profile.php?id=100000122595896 Vanditt Sama

    Any mp3/mp4 player in India is known as an ‘iPod’. This tells us how people are unaware of apple’s existence. And even if someone wishes to buy an iPhone, (after he collects the money) it’s difficult to find one in the market. Travelling across the country to buy a phone just seems stupid. Lets see how the ‘change in tactics’ by apple affects the situation.

    • http://www.facebook.com/profile.php?id=100000122595896 Vanditt Sama

      Its at least 3 years before LTE is available in india. They can introduce a non-LTE model if that helps the pricing to go down.

    • http://twitter.com/adhithyagokul Adhithya Gokul

      Agree completely. They call every damn MP3 player as iPod. I have seen people tell they have Sony iPod , Samsung iPod etc which I find so funny but many don’t know that iPod mean a music player made by Apple. They think iPod means music player and every company makes iPods

      • http://www.facebook.com/profile.php?id=100000122595896 Vanditt Sama

        And there’s one more thing. I have an iPod touch 4g and if you tell people that it is an iPhone, 9 out of 10 are fooled..

  • AKSHAY DOIPHODE

    well i am from mumbai , i use an iPhone 4S 32gig , i had bought it for 44k rs , the problem is yes , us indians do not dig into apple , plus we dont have an iTunes music store , thats cause we have the bollywood industry for music and its way awesome (no offence) , thats why , i’s prefer something like a 36k samsung galaxy s3 over an exorbitantly priced iphone , which wouldnt offer me features like the s3 as well (plus with apple maps its doomed) lol , so i guess cause there arent things that go with iDevice in india , its useless to have them , and not because androids are cheap , i prefer androids over the above given clarification :)

  • Demo

    I am Indian :-)

  • http://www.facebook.com/yuvraj.wadhwani Yuvraj Wadhwani

    Indians get ripped off when buying a new iPhone. The iPhone 5 will be launched for around a 1000$. We will pay the full retail price for not so good maps, below average turn by turn, bad Siri (doesn’t get our accent), no working passbook, no sports scores, no restaurant reservations and other services.
    Still iPhone is still considered a luxury here.
    PS: The price of iPhone 4 8GB here is 28,350 and 4S 16GB is 38,500.