Tech Talk | Courtship over, Apple now ready for big India engagement

China’s loss is India’s gain.

Technology giant Apple has a big task at hand – to boost its flagging sales. And it knows too well that the route to achieve that goes through India, and not China.

Of late, the iPhone maker has been bending over backwards to win over Indian consumers. The Cupertino-headquartered powerhouse is now keen to set up its own retail stores in India hoping to drive up sales by better engaging with its consumers in the world’s fastest-growing smartphone market -- where its sales have slowed in the past year.

According to a Bloomberg report, Apple has zeroed in on a few places in Mumbai – comparable to iconic locations for Apple stores in Fifth Avenue in New York, Regent Street in London or Champs-Elysees in Paris – where it will open its first company-owned and managed retail outlet in India. It’s expected to take a final call in the next few weeks.

This marks a departure from the its earlier model of retailing and servicing through local partners. So, what's driving this change in approach?​

Apple appears to be have realised that it has not done enough to exploit the potential of a booming phone market in India. That realisation is aided by the production pangs it is facing in China.

Why is a company-owned Apple Store such a big idea?

Globally, company-owned Apple Stores are the ultimate destinations for consumers who want to soak in the Apple experience. Inside the store, product selling doesn’t come first. Trained professionals educate prospective buyers about how to get the best out of any Apple product and self-care and self-service, if need be – something that has not been up to the mark in India. It not only helps Apple push more products, but ensures repeat footfall as consumers return for the second product or, maybe the third.

The decision to go in for company-managed Apple Stores in India comes within a month of the company’s announcement that it will start mass production of iPhones, including the latest and flagship models, in India.

The surprise is this time, Apple is going ahead without securing any special concessions for retailing, which it has been seeking from local authorities for quite some time now.

Apple has realised its mistake by not taking India seriously enough. High prices and intensifying competition from Chinese smartphone makers have hit its sales hard, which are down drastically. In 2018, it shipped 1.7 million iPhones, down from 3.2 million in 2017, the worst since 2014’s sales of 1.5 million units. Its market share too has been melting, down to 1.2 percent in 2018 from 2.4 percent in 2017, according to Counterpoint Research.

Apple is mindful of this declining trend. Over the past couple of months, it came up with special promotional discounts for specific models to revive sales, which probably has worked to some extent. But it soon realised that any promotional discount is not enough to sustain sales growth in India. It has to come up with something different -- alternative ways to bring in customers and hold on to those who might be toying with the idea of shifting because of the price.

That is where the whole idea of local mass production and company-owned and managed retailing outlets start. Apple is hopeful that these two strategies will not just bring down product prices, but help it gauge the pulse of an Indian consumer better.

The maths is working out too. Local production straightway takes out 20 percent customs duty and 12 percent GST. The cost of manufacturing an iPhone will drop as cost of labour is cheaper in India -- just about a fourth of China.

What’s more, the operational cost of Apple Stores will be part of its marketing budget. That means retail partners’ budget will simply vanish, ultimately bringing down the cost further as Apple sets up a sizeable number of stores across the country.

For now, local production coupled with its own retailing is the best shot Apple can try to make the India story a success without, of course, losing its premium positioning. Truth is, China is no longer the proverbial goose that continues to lay golden eggs for Apple. India can be that if the US company plays its cards right .

The strategy Apple is trying out in India is somewhat similar to what worked in China for the past 10 years. To be sure, the firm is up against the same set of Chinese smartphone makers in India too.

Well, that may turn out to be an advantage or the biggest worry, depending on how Apple looks at it. There is a clear and present danger simply because they are the ones that dethroned Apple in China.

But the India story could well take a different trajectory.