Before commenting on what could possibly be the influence on the Indian smartphones market due to the entry of refurbished iPhones entry in India, it is important to look at the following facts and figures:
Factors influencing Indian customers purchase decision
· India is a price sensitive market and 70% of the smartphones sold in India are priced in the range $100-$250.
· The smartphone customer sector consists of a huge middle class, relatively large rich class and a small economically weak class.
· Consumers prefer the branch with which they are familiar, have price going well with their pockets, available service centers, proximity to brand stores, brand name and trust, physical appearance and peer reviews.
· Indians are value driven and seek out the desired functionality like camera, sound quality, dual SIM features and good processor, high RAM, high internal memory, good physical appearance and other features specific to the person in the limited price range.
Current Smartphone trend in India
· Samsung currently occupies 25.7% smartphone market share followed by Micromax (14.3%), Intex (9.6%), Lava (6.8%) and Lenovo (5%) while Apple occupies a very small share of this market i.e 1.9 %
· India’s smartphone volume has grown by 23% in the Q1 2016. The number of smartphones is expected to grow over 650 million by 2019
· The spending on smartphones is anticipated to more than double by 2025.
· Average selling price of Samsung is $173 while that of Micromax being $86. Compared to this, the average cost of an Apple iPhone is $612.
· 86.5% of all the smartphones shipped in India last year were priced under $200 according to Llamas, research manager at IDC while 70% of the smartphones sold last year cost under $150.
· Around 7% of the Indian crowd spends $300 or more on smartphones.
Points in Favor of Apple:
· Apple is the very definition of luxury in India and no other smartphone brand can beat it over its prestige appeal.
· Apple EMI schemes and buyback schemes have considerable boosted sales in India. According to Counterpoint Research, 800,000 iPhones were shipped to India in the October-December quarter while the total sales for year 2017 stood at 1.7 Million, whopping 47%, which is a big number.
· Apple’s share rose from 11% in 1Q15 to 29% in 1Q16. In the same period Samsung shares dropped from 66% to 41%
· Sales of 4G-enabled handsets increased to 15.4 million units in quarter ending March 2016. Apple offers some distinct features possible with 4G-LTE speeds as per Tim, CEO Apple. It is possible that when Indians realize what it can do, they are willing to pay more.
· The refurbished phone to be sold in India will cost around $260-$350 as per the price range of year old iPhones in the western markets. Indian middle class is already spending around $150-200 on smartphones. These figures reflect a high possibility of Indians tending towards the purchase of iPhones.
· A report by McKinsey Global Institute (MGI) suggested that at the current rate of growth, average household incomes in India will triple over the next two decades. This is another promising statistics which supports iPhone sales in near future till the desire of middle class people to own an iPhone saturates out which is far too long way to go.
Challenges for Apple in penetrating the Indian Markets
· iPhones are priced relatively high compared to other premium smartphones offering better functionality
· Apple currently plays in the high end of the market which is only 7%.
· India’s “Make in India” and strong opposition from competitors would not allow importing refurbished phones to India.
· Strong competition with Chinese, local and other global brands that introduce new models every now and then at reduced prices compared with apple who introduces new model once in a year or two. On an average, a smartphone user in India sticks with one handset for around 14 months.
· Apple needs to launch direct retail stores to be able to give customers the desired experience that would do the necessary marketing. Currently it only has 1% presence in the market.
· Lack of dual SIM functionality, ability to extend the phone ROM, bad experience of the customers with iPhone on upgrading the OS, Apple pay, Apple news, problems with Maps, iTunes, need of computer to set up the phone with older OS’s, lack of language flexibility, lacking local content are other factors which need to be addressed if it needs to create long term value for Indian customers.
· Further the specialties of iPhone include its long battery life, higher screen resolution, video editing features, and access to wide range of apps through app store majority of which are not of interest to the wide percentage of smartphone users.
Expected changes in Indian smartphone market due to refurbished iPhones
To be able to thrive in Indian markets, Apple has to design the iPhone as per the user requirements and cut down its cost. If the refurbished handsets are allowed in India following are the expected consequences:
· Stiff competition with other local producers would mean the prices of the smartphones in the market for the same functionality with rapidly fall.
· 4G connectivity will show a boost and this would mean the existing Androids supporting 4G would be available at cheaper prices
· No doubt iPhone sales are expected to rise since it would be an excellent opportunity for the Indian middle class to have the much wanted iPhone in their budget range
· Relaxation of the 30% production in India move could attract other luxury brand to make their presence in India and that would not be good for “Make in India” initiative. In that case government might withdraw the relaxation offered and that would mean Apple has to set up its production units in India.
· Apart from this, Apple will require hiring Indian talent to better understand the needs of the Indian smartphone customers, understand Indian market and design iPhones as per that.
It could clearly be seen that all these changes will take time and huge investment. Considering the Apple’s sole objective of high margins per sale, it is hard to say if it will be able survive for long in India provided it sticks with its marketing approach. Further, considering the major segment of the Indian smartphone market being middle class, it is unlikely that Apple will be able to make them stick to their brand for the long time where the other players who well understand the market will adapt very quickly.