Apple's Indian Overhaul Is Working

The second-largest country in the world by population has always been weak spot for Apple and the iPhone. There are numerous reasons why the company faces competitive hurdles with Indian consumers.

Perhaps most important is that wireless carriers in the nation don't subsidize smartphones, making rival devices much more affordable. On top of that, distribution is highly complex and Apple is unable to open its own retail stores in India, which means it has far less control over the buying experience than it would like. Last summer, Tim Cook cited the "multilayer distribution" in India as a particular challenge, since that adds costs along the way.

However, Apple has overhauled its Indian operations in recent months in order to grow its presence in the region -- and those efforts are working.

Catching up with Sammy
One of the more important aspects of Apple's changes has been to significantly broaden its distribution network. Many Indian consumers prefer to purchase mobile devices from smaller mom-and-pop shops as opposed to big branded retail stores. By strengthening its relationships with these local outlets, Apple is starting to gain more ground, according to a recent CNN report.

IDC estimates that Apple has quickly grown to grab the No. 2 spot in the Indian smartphone market by revenue. Like in other developing economies, Samsung is still top dog due to its willingness to target every conceivable price point. Since Apple targets the high end of the market, it has a relatively lower unit share, even as its revenue share is on the rise.

Smartphone Vendor

Q4 2012 Unit Share

Q4 2012 Revenue Share







Sources: Canalys (via The Wall Street Journal) and IDC (via CNN).

IDC research director Venu Reddy said that Apple has made a major shift in its smartphone positioning within India.

Since Apple has historically placed low priority on the Indian market due to these constraints, supply and availability have also suffered up until the recent changes. A month ago, IDC said iPhone shipments had soared by three to four times thanks to an expanded distribution deal with Redington, which is responsible for almost 70% of Apple's Indian sales.

Other factors contributing to Apple's recent success is offering no-interest financing on iPhones and beefing up local marketing efforts.

The curve balls
Of course, this is all before investors even consider the potential for the expected low-cost iPhone that is likely due out later this year. That device is expected to retail at unsubsidized price points of as low as $350, well below the current $800 price tag of a new iPhone 5. Even a previous-generation iPhone 4S will still set an Indian consumer back by $480.

BlackBerry is also going high with the Z10, pricing its new flagship at $800. The company launched its new smartphone in India just last month alongside a local BlackBerry Music Store. BlackBerry 7 devices have historically done well in the region, but that's more a function affordable price points and BlackBerry may have a tough time with the Z10 at $800.

As Nokia transitions away from Symbian, its Indian fortunes have also been on the decline as consumers adopt Google Android. Nokia's revenue share in India now stands at just 7.3%, says IDC. However, Nokia has a knack for targeting lower market segments and will have better chances at success compared to BlackBerry thanks to devices like its Asha lineup.

It may be a long time before Apple is able to set up direct online sales or retail stores, both of which would greatly improve Apple's prospects in the region. Until that day comes (if ever), expanding distribution and making devices more affordable through lower price points and financing will have to suffice.

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