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American tech giant Apple has reduced retail margins on the iPhone X by nearly 30 percent after large format chain owners and small-scale retailers claimed that the company makes profit from a massive margin but does not want its retail partners to benefit, reported the Economic Times.
"Apple has cut margins on the iPhone X from 6.5 percent to 4.5 percent for large retailers like us, and if a customer pays by card, which is usually the case, the margin reduces to almost 1.5-2 percent,” said Subhash Chandra, Managing Director at Sangeetha Mobiles, which has 400 stores across the country.
Even the costliest iPhone has a high demand in India. Large retailers continue to import the iPhone, but there is often a supply-demand mismatch. However, they have been concerned about their profit.
“Apple gives the least margins… How on earth do they expect the retailer to work for them for free — our overheads are anywhere around 10 percent,” Chandra explained.
Apple declined to comment on the margin cuts and supply issues in India.
According to the report, industry insiders say that brands like Samsung or Xiaomi offer more margin than Apple does, around 12-15 percent. Oppo and Vivo followed them to keep up with the competition, but Apple has refrained from increasing its margins for retailers.
Offline retailers seem to face other challenges such as cashbacks and other discounts on iPhones, including the iPhone X, offered by online retailers making it difficult for them to be in competition.
Many retailers in India have stopped stocking iPhones across their stores. A chief executive of another top retail chain in India said that they had done the same across 300 stores due to the cut in margins and owing to lack of control on retail pricing in the online and offline markets.
Considering the severe supply contraint of iPhone X in the market, unorganised traders have also critised Apple's move.
“People are ready to give a premium on the phone, so we don’t have an option but to work with Apple’s margin cut and yet, face the ire of customers if the iPhone X is not available,” said a leading retailer in the unorganised sector.
Traders also expressed concerns about the delayed supply of iPhone X. Another handset retailer said that it had got only 400 units of the iPhone X in the first three weeks since launch.
Analysts at Counterpoint cautioned that Apple may lose the plot if it waits too long for regulatory, policy or business certainty as India is the world’s second-largest handset market after China by volumes.
“They (Apple) will have to start now because if they lose a window of opportunity in next two years to be on mind of the growing smartphone user base, it would be somewhat difficult to grow faster in the world’s ssecond-largest smartphone market,” said Neil Shah, research director at Hong Kong based Counterpoint Research.
In contrast, people familiar with the matter said that India received higher supplies of iPhone X than Thailand, which was a larger revenue generating market than India, said the report.
In a statement to Moneycontrol, Apple said: "Thailand has not yet launched iPhone X, while India was in Wave 1 - so the question getting higher supplies than a market not yet launched does not arise - Thailand launches only on November 24."
Earlier, Apple CEO Tim Cook had spoken about growing the market, which would require building stores, channels, markets, developer ecosystem and the right kind of product lineup.
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