Apple CEO Tim Cook has been bullish on India, the world’s third-largest smartphone market after China and the US. The massive 4G network rollout and a growing middle class should help Apple boost its sales in the country. However, the iPhone sales seem to be dwindling in India. The tech giant’s market share has remained in the 2-3% range for more than five years.
Three senior Apple execs depart amid falling iPhone sales
Apple started assembling the iPhone SE and iPhone 6S locally in India to avoid import duties and make its phones more affordable. The flagship models are out of the reach of most consumers, so the company focuses on older models to generate sales. The Cupertino company sold only 3.2 million iPhones – most of them were older models – in India in 2017. And sales in the first half of 2018 plunged to less than a million units, according to Bloomberg.
Amid all this, three senior Apple India executives have left the company in recent weeks. The executives who quit are Rahul Puri, the head of national sales and distribution; Manish Sharma, the national chief for carrier sales; and Jayant Gupta, the chief of iPhone sales and Apple Premium Retail stores. One source familiar with the matter told Bloomberg that Apple was restructuring its Indian team.
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The Cupertino company continues to struggle in India, where import duties significantly inflate the prices of its already expensive gadgets. The Indian market is dominated by Xiaomi, Oppo, Vivo, Samsung, and OnePlus. Apple doesn’t assemble its flagship models locally, which makes them way too expensive for most Indians. I own an iPhone SE (because it’s affordable) and a OnePlus 5 (because it’s great in every aspect).
Will I buy the shiny latest iPhones? Probably never. OnePlus 6 costs about a third of the iPhone X, and its performance in every department is on par with the ridiculously expensive iPhone X. For the same price of an iPhone X in India (roughly $1,400), you could buy a OnePlus 6 and a MacBook Air! Tim Cook believes India could be the next China, but it will take India more than a decade to reach where China’s per capita income is today. So, most Indians can’t afford to buy new iPhones right now.
Unable to understand India
According to Counterpoint Research, fewer than a million iPhones were sold in India in the first half of 2018. And most of them were older models such as iPhone SE, iPhone 6S, and iPhone 7. The second half is traditionally stronger than the first half for smartphone sales, but the 2018 iPhone sales will still fall short of 2017’s 3.2 million units, predicts Counterpoint’s research director Neil Shah.
Neil Shah argues that Apple needs to do much more to attract users in the world’s second most populous country. The iPhone maker hasn’t been putting great focus on the country “because the market is so minuscule.” But Apple’s “inattention” could send more consumers to Android, making it increasingly difficult for the Cupertino company to build a loyal user base.
Sources Bloomberg spoke to blamed Apple India’s new chief Michel Coulomb for the falling iPhone sales. Coulomb took over as the chief of Apple’s Indian business in December 2017. His team has not only been slow in cultivating business relationships, but also they “had difficulties understanding the country.” Apple’s sales team is “direction-less” right now, said sources.
Coulomb focusing on brand, not sales
Michel Coulomb has launched a major shift in sales strategy to maintain the brand’s “premiumness,” even if it leads to lower iPhone sales. The previous head of Apple’s Indian operations Sanjay Kaul was boosting sales through rapid expansion and discounting. But Tim Cook & Co. felt Kaul’s efforts were not yielding results and diluting the brand’s image. Apple’s retail sales partners were also not happy with Kaul’s discounting-driven strategy.
Coulomb’s “cleaning-up exercise” is aimed to maintaining the brand’s premium image at a time when competition in the premium segment is at all time high. OnePlus, Samsung, Google, Huawei, and many others are trying to dominate the segment. Coulomb wants to sell iPhones only at stores that offer a complete sales experience, which is why is he clamping down on neighborhood stores.
Coulomb’s strategy might work in maintaining the brand image, but it might not help boost sales. Even people looking to buy a premium smartphone tend to focus on the INR 30,000 to INR 50,000 price segment. That’s why OnePlus was able to sell one million units of OnePlus 6 in the country in just three weeks of launch. And that’s why older iPhone models such as iPhone 7, 7 Plus, iPhone 6S, and iPhone SE sell much better than the latest ones.
Apple’s new strategy would have worked well if India were a rich country. But it is a country with per-capita annual income of just around $1,800. And unlike in the US, most Indians don’t buy phones through carrier stores and pay over 12, 18, or 24 months.
They buy unlocked phones by paying upfront and then get a SIM of their choice. That’s one of the reasons they don’t purchase ridiculously expensive devices like iPhone X. It’s way out of their reach, and they don’t prefer to pay in installments. Personally, I believe if you can’t afford to pay the full price upfront, you shouldn’t buy it. Counterpoint’s research director rightly said, “It’s a Catch-22 situation for Apple in India.”