Apple opens first stores in India in bullish move to increase sales and market share
▶ Tech company faces headwinds that have affected demand worldwide, writes Rebecca Bundhun in Mumbai
India’s complex regulatory environment and its price-sensitive market could frustrate Apple’s plans, analysts say
Apple is opening its first stores in India, the world’s second-largest smartphone market, this week as it focuses on a retail industry with enormous growth potential and a promising manufacturing base.
The company’s move is only logical as the iPhone maker faces global macroeconomic headwinds that have affected sales of its devices worldwide, analysts say.
“There is an expectation that given global softness in demand, particularly in big markets like the US and China, which are going through their own economic issues, India will be a shining light,” says Barnik Maitra, managing partner at consultancy Arthur D Little in India.
“Because the economic story of India is different [from the rest of the world], I think it has become far more important.”
Factors other than being one of the fastest-growing economies in the world this year are also working in favour of premium brands in the country, industry experts say.
Data released by the UN last week shows that India surpassed China to become the world’s most populous country with more than 1.42 billion people.
That underscores the potential of growth in Apple’s sales, at a time when the company’s overall revenue across product lines is on the decline.
Figures from the International Data Corporation show Apple’s global personal computer shipments declined more than 40 per cent in the first quarter of the year, compared with the same period last year.
Apple’s revenue globally fell 5 per cent to $117.2 billion in the quarter to the end of December, the company’s most recent earnings report showed.
“India has a large and growing middle class, which is a key demographic for Apple’s product,” says Akshay Hegde, co-founder of Indian e-commerce company ShakeDeal.
“While there are challenges to operating in India, the potential rewards are significant.”
On an earnings call in February, Apple’s chief executive Tim Cook said that India “set a quarterly revenue record and grew very strong double digits year over year”. He described India as a “hugely exciting market for us and is a major focus”.
“We actually did fairly well through Covid in India. And I’m even more bullish now on the other side of it or, hopefully, on the other side of it. And that’s the reason why we’re investing there,” he said.
While the California-based company’s sales have been growing rapidly in India the past few years, Apple has still only managed to grab a relatively small share of the market in terms of sales volumes.
Data from Counterpoint Research shows that Apple had a 4 per cent share of the smartphone market last year in terms of shipments of devices to vendors, compared with its share of only 1 per cent of the Indian market in 2019.
Despite its products being relatively expensive, Apple has so far managed to capture 18 per cent of India’s smartphone market in terms of value, according to Counterpoint. It expects Apple’s market share to grow this year as the company aims to take a bigger bite of the pie with its first retail stores in the country.
Mr Cook is due to travel to India this week, with Apple’s store in Mumbai set to open in the Bandra Kurla Complex on Tuesday. That will be followed by the opening of a store in New Delhi two days later.
Up until now, Apple products had been sold through third-party stores in the country, and through Apple’s online store, which was launched in India in 2020. Analysts say having its own stores in India could help Apple to hasten its growth in the country.
“It is an important market to establish its retail presence in, particularly as Apple’s own stores have historically been evangelical centres of conversion for non-Apple customers to become Apple product owners,” says Utkarsh Sinha, managing director of Bexley Advisors, a boutique investment bank in Mumbai.
Apple’s retail push also goes hand-in-hand with its strategy of expanding its manufacturing base in India. “Apple’s retail stores in India also speak to a two-sided ‘China plus one’ strategy for the company: It has already begun moving some of its manufacturing to India to reduce its single-country sourcing reliance,” says Mr Sinha.
“India is equally critical for them [Apple] as a market, to offset their reliance on China as a large but turbulent international market.”
Apple has tripled production of its iPhones in India in the last financial year to the end of March, assembling more than $7 billion worth of the devices in the country, according to a Bloomberg report.
The company now makes 7 per cent of its iPhones in India through partners including Foxconn Technology Group, as it tries to diversify away from China amid tension between Washington and Beijing.
About $5 billion worth of these phones were exports, Bloomberg reported.
Apart from being an attractive retail market, Apple also has compelling reasons to turn to India as a manufacturing base, Mr Hegde says.
“India has a large and young workforce, which is attractive to Apple as it looks to diversify its supply chain away from China,” he says.
“India’s government has [also] introduced several incentives and schemes to encourage manufacturing in the country, which makes it a compelling destination for companies looking to expand their manufacturing capabilities.”
Prime Minister Narendra Modi’s government is trying to boost manufacturing in the country to bolster the economy and create more jobs. It aims to turn India into a global manufacturing centre under its Make in India initiative and has identified electronics as a priority sector.
“All three manufacturing partners for Apple in India, Foxconn, Wistron and Pegatron are awardees of the production-linked incentive scheme, which has been one of the top government schemes aimed at increasing manufacturing in India,” says Prachir Singh, a senior analyst at Counterpoint Research.
However, Apple could face potential hurdles moving forward, experts say.
“One of the main challenges that Apple could face as it tries to boost its retail and manufacturing presence in India is the country’s complex regulatory environment,” says Mr Hegde.
“India has strict local sourcing rules for foreign retailers, which could limit Apple’s ability to fully control its supply chain in the country.
“Additionally, India’s infrastructure and logistics network are still developing, which could pose logistical challenges for the company.”
The affordability of Apple’s products is another potential obstacle in the price-sensitive Indian market. However, Mr Maitra of Arthur D Little says that the US company has “actually figured out a way to create attractive pricing propositions” in India, by partnering with local ‘buy now, pay later’ companies, which provide credit to customers, and by offering discounts against trade-ins of old devices.
This does come at a significant cost to Apple, Mr Maitra says, explaining that the company is spending heavily on such programmes. However, it is an investment that has the potential to reap enormous rewards in the future, he says.
“India will become, in my opinion, important – maybe as important as China in the Apple ecosystem, maybe in five or seven years from now – because Apple does have the potential to have a two-digit market share by volume and also a two-digit market share by manufacturing [in India],” says Mr Maitra.
“India will become one of the most important geographies for Apple outside the US.”