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Summary:

Apple is enamored with China — and rightfully so. However, in not paying attention to India, it has allowed world’s second-largest mobile market to become a mostly Android phenomenon, leaving upper end of the market to Samsung. Wrong strategy, if you ask me.

Apple CEO Tim Cook

J.J. Valaya is one of India’s preeminent couturiers and is a self-confessed arbitrator and curator of good taste. I know that for a fact because I have known him from the time when he was a student at India’s National Institute of Fashion Technology. If you enter his store, you can see that tasteful elegance on full display. And he also likes gadgets — a lot of them. He walks around with a Samsung Note and a Blackberry Bold.

His Bold is on its last breath so he asked me: what should I buy? Well, since he and I have a similar taste palette, I recommended iPhone 5. But that didn’t impress him — he said, well, it didn’t feel that different than iPhone 4S. When I asked him if he had spent time on it, he answered in the negative.

And that’s when it hit me — the reason he can’t be convinced was because he had not been able to experience what is quintessentially Apple and what converts a regular person into an Apple customer: the immersive Apple Store experience.

Many phones for many folks

To understand the Indian mobile phone market  – about 900 million total connections — one has to understand that it is literally different strokes for different folks. The low end, budget and medium end of the Android-based smartphone market is being swept by local brands such as MicroMax, whose Canvas devices are red hot. And there are the no-brand Chinese handsets gunning for that low end. Add two Chinese biggies, ZTE and Huawei, to the mix and you have a lively smartphone marketplace. Sure there is Nokia and Blackberry and Sony, but it is hard to tell if they are doing well or not.

Apple Store in Shanghai

Apple Store in Shanghai

However, when it comes to the top end of the market, it is Samsung all the way. Sure, there is Apple, but frankly it is a distant second. In November 2012, Apple launched the iPhone 5 in India and in the three months ending Dec. 31, 2012, the Cupertino, Calif.-company sold a mere 252,000 iPhones in that country. The data prompted everyone from the Wall Street Journal to Reuters to claim that Apple was doing well in India, but is it really doing well?

Canalys press release 160113 - tableIf you ask me, the answer is no and frankly they could be doing better. Yes, compared to China, India’s smartphone market is puny: According to Canalys data, there will be about 26.5 million subscribers in 2013 (though I get a feeling they are underestimating the potential and demand). But it will grow bigger, and it will grow fast. IDC says the market will be 108 million units in 2016 versus total smartphone sales of 19 million in 2012. In other words, it is a big enough opportunity for Cupertino to wake up and smell the curry.

Samsung side up

I walked around stores in and around Delhi about a week ago, which is where my parents live. And even as a casual observer, it was clear that in India, Apple’s place in the market had been reduced to just another handset. The Samsung Galaxy branding was in your face — from television to in-store displays to the newspapers. The Korean giant was basically everywhere. I had walked into many stores where iPhones and iPads were on display, except they were lost in a confusing array of other phones. (In September 2012 the company partnered with local distributors like Ingram Micro and Redington to get to retailers in smaller towns.)

People want a lot of features on stuff they buy — more buttons, bigger screens, more memory — more is just better, in some parts of the world. And that is why larger phones and hideous phablets are so much in demand. That plus incessant advertising by Samsung has turned the (attention and thus the) conversation away from everyone else, Apple included. Samsung sold 40 percent of the 5.2 million smartphones sold in India in the three months ending December 2012.

Ignorance is not bliss

I am just baffled that a company that would insist that Best Buy and Target create an in-store experience that has some resemblance to the Apple Store outsource its sales to carriers and third parties, who sell phones like a street cart vendor sells vegetables and fast food. My eyes bleed every time I have to enter one of those carrier stores in India. They are the antithesis of the Apple brand.

I am frankly amazed that Apple has left the second-largest mobile market — India, that is — to its own devices. I don’t understand why. It is not that there is a lack of people with money. There are probably more potential customers of iPhones and iPads in India than in say Germany, the U.K. or in the Netherlands. They all have multiple Apple stores, so why not India? When someone asked him last year about company’s strategy in BRIC countries, Apple CEO Tim Cook said that of all the countries, it is likely to go after Brazil after China instead of India and Russia.

And maybe it is time for Apple to go back to the drawing board and come up with a new plan. One that involves opening a handful of Apple’s own stores in India — say in Delhi, Bombay and Bangalore. There are relatively few stumbling blocks. Last year India allowed 100 percent foreign ownership in the single-brand retail segment, which is great for a company that sells its own brand of goods. Apple does just that.

Rachel Lashford, managing director for mobile at Canalys, told the Wall Street Journal, “Until Apple is able to reach lower price points, it will continue to be overtaken by competitors in India.” I couldn’t disagree with her more.

Go ahead be elitist

I admit, that I normally spend most of my time in India in big cities — Delhi and Bombay — but I can tell from the wall-to-wall advertising and all the talk, Indians love their mobile phones as much as their cars. For a certain class of people — the upwardly mobile and the real estate rich — their phones are often a badge of success, much like the cars they drive. For these folks it is either the very best or nothing.

Apple simply has to stop thinking that it can sell cheaper iPhone 4 and iPhone 4S models to Indian consumers. Just like Chinese buyers, Indian buyers are very “badge” conscious and want to get the latest and the greatest. It is time for Tim Cook & Co. to embrace their internal elitist and go for the premium positioning of the brand.

And it all starts with an Apple Store. As far as I am concerned, an Apple Store is the gateway drug to the all-Apple experience. It is where you touch, feel and fall in love with Apple products. The interaction with iPhone and iPad and just the complete retail experience makes you either one of the “fruits” or not. It is also perfect place for up-selling different products.

timcook2

Fear of an Android (only) nation

I even found the perfect location for the first Apple Store: the DLF Emporio mall, which is arguably is one of the plushest shopping malls in Delhi. This is where wealthy (and I mean crazy rich even by American standards) go shopping for luxury items from Chopard, Gucci, Roberto Cavalli, Chanel and Louis Vutton. The prices there would induce rapid gulps in any sane person, but on my last visit (which was about 10 days ago) I saw people walking with more shopping bags than one sees in say Rodeo Drive. The whole mall was based on the notion of up-selling.

The same buying dynamics — brands as a badge of one’s success — that work in China, work in India too. Imagine if there was an Apple Store right in middle of this opulent (and over the top) building — the iPhones will fly, and so will iPads and Macs. Apple’s brand has a level of luxe associated with it and I think Apple would become the ultimate badge phone.

Otherwise, Apple will continue to lose mind share to the likes of Samsung, which has done a good job of branding itself for the “status symbol” end of the market.  Cook is a pragmatist and I am sure he realizes that it is important to play to win in India. If he doesn’t, then India becomes an Android Nation — it already is, to some extent. For folks like Valaya who should be ideal Apple customers, there is no reason to think about them.

  1. I totally agree with your Article here Om, but that Shanghai store sketch feels a little irrelevant …

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  2. Durjoy (Ace) Bhattacharjya Monday, February 25, 2013

    Great article Om- and I think you’re on the right track regarding taste: it might just be that the Indian market responds well to “provable stats” (ghz, RAM, screen size). Which as the “phablets”(had to look it up) take to the logical extreme.

    As you point out, there is a conspicuous consumption component to the high end mobile phone market– and you just don’t get any credit for a new phone that looks remarkably like an older model. So I’m not sure duplicating the sleek Apple retail experience is really the answer- it might be too boring for the India market. Think Big Bazaar and their approach to big box retail.

    I think that they have to do the equivalent to what Toyota Prius did in the US market. Go to Hollywood / Bollywood, get absurdly attractive people to be photographed using the phone and make it cooler than Android. Don’t discount the price and limit the number that India will be “allocated”. ;)

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    1. I disagree mostly because I think the one brand experience is the key. I went into the Tom Ford store and well, let’s just say, it was reinforced that sometimes “brands” just are too powerful and overcome market realities. (In case of Tom Ford, it was overcoming the obvious problem of pot-bellies.)

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      1. Isn’t the main issue that Apple can’t legally create their own electronics store unless they build/assemble a certain amount of their product in India, which they don’t do?

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  3. I agree. All my friends in India are more leaning towards Samsung. Desi problem of ‘more features!’

    But yeah, Apple could have created a more exclusive brand by keeping the prices stiff high and open exclusive stores in locations like you mentioned, where money would have just flowed. Heck yeah a color just for India, exclusively available in one of those malls, its a guaranteed money maker!

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    1. I suppose the same ‘desi problem’ exists in the rest of the world, including the US, where more people are leaning towards Samsung. If that is true, then it’s not a ‘desi problem’, it’s a worldwide problem. Not a problem, a worldwide preference.

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      1. I have no idea what you are talking about AS. Elaborate.

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      2. The previous comment I was replying to mentioned that Samsung is popular in India because of the “desi problem of ‘more features!’ “. I was just pointing out that Samsung is popular the world over. Not just in India. So, it’s not really a ‘desi problem’ as the previous comment claimed.

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      3. If you’re referring to volume, then yes Samsung sells more units. They have always sold more units. However, data last Q showed that the number one selling smartphone worldwide was the iPhone 5 and the number two was the iPhone 4S.

        Last Q incidentally Apple had higher revenue than Samsung overall although Apple has a much smaller product line and 2x the profit.

        Samsung spends around 3x more than Apple on advertising and that’s probably where this false perception that Samsung is outselling Apple is coming from. I believe last Q was the first time Apple actually had higher revenue than Samsung and the gap in profits in actual $ terms between the two also was the highest.

        So, no Apple sells more than Samsung worldwide if you’re talking about competing products and overall company performance as well.

        As for India, it’s a hobby for any premium brand that exists. There is a small elite that has substantial purchasing power. Most people buy Chinese knock offs and pirate content. Neither iTunes not Apple can make it in India as it stands today. They need to have really low priced products to sell to the mass. It’s a much smaller market for premium products than either Brazil or China.

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      4. “more people are leaning towards Samsung” – A S please provide (relevant; fresh) data (in this fast moving market), last I heard (for last quarter, world wide!!!) Samsung G III, was third!!! popular smartphone, with iPhone 4s 2nd!!! and iPhone 5 firs, as measured by sales; google it.

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  4. I don’t agree with you Om on ‘badge consciousness’. I think India has an upper (economic) class, but an even bigger middle class, where productivity and affordability come first.

    Also, the buying decision for the average Indian isn’t the same as it is in North America. I am not sure that an immersive Apple store experience will alone do it. India is a highly recommendations and needs based economy, vs. find the best product or best value type of economy. Things like price certainly are a factor, but not in the way North Americans think.

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    1. Look like the last half of my comment for cut off:

      So, in short. Yes, lost opportunity for Apple. However understandably, India may not their focus at this time simply due to the cultural hurdle they have to overcome. For example:
      1) The constant mental justification by a buyer/ prospective buyer (sometimes over-justification) of why one chooses any phone – whether Nokia, Samsung or anything else.
      2) Also, things like experience, design and an ecosystem have less tangible meaning in India, and another reason why the Apple store experience, immersive as it may be, will alone not help Apple win. Tangible components such as features tend to rule today.

      And frankly, the Indian govt doesn’t make it easy for multi-nationals to set up shop there either.

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  5. - Apple phones are overpriced and under-featured as compared to other phones worldwide. In India the phones that are at competitive prices are 3 year old models. People here are not that dumb. (iPhone 5 costs 50K INR).
    - Plus there is little carrier subsidy here so no one to push it for cheap.
    - Apple doesn’t have a ‘cult’ following here either.
    - iTunes just came to India, still not sure if apps accept Indian Credit Cards.

    Apple is too snobbish to come to India for it’s own detriment, but hey, the consumers here have choices and are happy with it. Whatever Android leaves Nokia can pick up (only if Nokia had the brains to time itself correctly… blunder of not releasing 920 over Diwali)

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    1. Sumit, agree with your comments.. Apple devices are too overpriced in India and lags quite a bit when it comes to new device release. With this attitude, there is no way one can avoid Samsung taking over the market..

      Even though, I am an Apple fanboy, it is unfortunate that Apple does not focus on India (yet)..

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    2. - iPhone 5 16GB is 45,500. Look out for retailers giving further discounts of up to Rs 1500

      - I don’t know about cult status and all but most of the customers here will buy an iPhone if it was affordable.

      - You could always buy apps from iTunes in India using your Indian credit card like any other international transaction you would do in an e-commerce website. Two months before iTunes enabled to buy in Indian currency as well. Does the new change still support Indian credit cards ? Yes. Source ? Myself who has been purchasing stuff.

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  6. “hideous Phablets”. You need to be reminded that in many developing country a person’s smart phone is their only computer….for a host of reasons. So phablets are the device of choice. Add that to the need for devices to be customizable, and the success of these non-Apple devices are a no brainer. Apple products are fine for a certain segment of the market….but they don’t scale well across entire markets.

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    1. That still doesn’t make them less hideous. Phablets are an abomination….

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      1. Not having the choice to do what you really want to do is hideous as well. Having a comfortable screen size to enjoy content without having to pay every time to a forced choice is freedom.

        I can see you love Apple, but having an Android phone with a ‘non-apple-standard’ screen size doesn’t make it any worse.

        Why should Indians pay hideous Apple tax to enjoy their phones?

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      2. They may be. Even I thought Phablets were ‘dead on arrival’ when Samsung launched the Galaxy Note I. However, you’ve got to give it Samsung that they have created a new ‘Phablet’ segment and generated a good deal of interest as well as sales for these devices.

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  7. Aditya Siddharth Monday, February 25, 2013

    Om, wondering if you are missing another element to Android’s popularity. An iTunes kind of content environment is still emerging in India and sideloading of content on to devices (through SD cards or simple drag-and-drop from PCs) are extraordinarily common and popular. Android lends itself very well to this user behavior and consumer need than Apple does, with its extremely restrictive ecosystem. So, just retail presence etc. is not a guarantor of success.

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    1. Aditya, Good points, but you can still do the same on an iPhone as well.

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      1. Aditya Siddharth Monday, February 25, 2013

        Having used both and not being a fanboy of either platform, I feel that doing it on Android is way more convenient.

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  8. I hope an Indian Apple rises from the ashes of Apple’s lost opportunities.

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  9. is there any country that can’t do electricity where apple is selling well?

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