Apple’s online store plan for India is the right move at the right time

Apple Inc is adapting to the pandemic. For instance, the company’s “Time Flies” event on

Apple Inc is adapting to the pandemic. For instance, the company’s “Time Flies” event on Sept. 16 will be held virtually, just like its Worldwide Developers Conference in June. In India, the pandemic-linked innovation will soon include a move that could revamp its retail experience.

The Cupertino-based company is reportedly launching an online store in the world’s second-largest smartphone market later this month. Apple did not respond to Quartz’s request for comment.

This comes after the company spent years lobbying for direct retail stores in the country, and got approval for the same only last year. However, coronavirus threw a spanner in the works for physical stores.

Experts say this is the perfect time for Apple to make an e-tail move. The company is witnessing favourable market reforms, it has boosted domestic production, and there has been a spike in demand for iPhone 11 and the new SE models. Meanwhile, anti-China sentiment on the ground has opened the window wider for Apple.

“Direct-to-customer is a trend picking across most industries where they want to eliminate the middle distributors to improve their margin as well as control the supply chain to drive better experience and authenticity of products,” said Yugal Joshi, vice-president at consultant Everest Group.

The India opportunity

Apple’s first store opened in southern California in 2001. Now, the iPhone maker operates over 500 stores in 25 countries and employs over 123,000 retail employees. But the brand, which debuted in India way back in August 2008, is sold in the country mostly through third-party sellers.

The lack of a direct store is often considered one of the reasons why Apple has struggled to cement its position in smartphone-crazy India.

“Local regulations, high import taxes, variable national infrastructure, high costs, lack of carrier subsidies, and nationwide logistics across a large territory have long hampered Apple’s ability to sell its devices online in India,” said Neil Mawston, executive director at UK-based Strategy Analytics.

But things have been looking up for Apple lately.

In the October-December 2019, Apple was one of the fastest-growing brands in India driven by multiple price cuts on the iPhone XR, thanks to local manufacturing, according to Hong Kong-based Counterpoint Research. In the first three months of 2020, Apple grew 78% year-over-year driven by strong sales of iPhone 11 and multiple discounts on e-commerce websites like Flipkart and Amazon. In the ultra-premium segment (above Rs45,000), it was the leading brand with a market share of 55% between January and March this year.

Going forward, the locally-assembled iPhone SE–the cheapest iPhone in India at Rs42,500 ($578)—could prove to be a formidable rival for the likes of Samsung and OnePlus.

The online play is perhaps in anticipation of this boom since physical stores are likely to continue seeing less footfall because of Covid-19. “In a post-Covid world, we are going to see more sales across categories happening online and via e-commerce, and this online store can provide a big boost to Apple sales and revenues,” said Anindya Ghose, professor of technology, operations, and statistics at New York University’s Stern school of business.

Moreover, the online store launch is coming right before the festive season starts in India when the demand for electronics, among other things, sharply increases. This will help Apple tap consumers who’ve been holding back on non-essential purchases amid the pandemic.

“We could see a significant relieving of pent-up demand (for smartphones) during the Diwali holiday season, and Apple could be looking to capitalise on that,” said Advait Mardikar, research analyst at tech market intelligence firm Canalys.

A genius idea?

After the country’s foreign direct investment laws were relaxed last year, the elusive Apple stores are supposedly coming soon. Meanwhile, over a third of iPhone sales in India are through online marketplaces such as Amazon, Flipkart, Paytm Mall, and others, according to Sukriti Seth, an analyst at Noida-based TechSci Research.

“Apple is betting that higher costs of developing its own stores and website in India can be offset by higher revenues and profits from affluent consumers,” Strategy Analytics’ Mawston said. “The Apple brand is more prestigious than Amazon or Flipkart, and wealthy urban consumers often prefer to deal directly with Apple.”

Half a dozen experts Quartz spoke to also agree that the online stores are not the endgame. It’s the teaser before physical retail is part of daily life again. Especially since Apple sees its stores abroad as “town squares” more than shopping outlets. There are boardrooms visiting entrepreneurs can use. There’s free wifi. Some stores hold coding classes for kids. Others host workshops to educate teachers on how to incorporate technology into their classrooms. The Genius Bar made repairs and replacements quick and easy. A team of Creative Pros teaches customers skills spanning photography, music, art, coding, and more.

Eventually, Apple could follow in the footsteps of sportswear brand Nike, which stopped direct retail on Amazon in late 2019 to forge a more personal relationship with customers. But in the past, removing the retail distributor hasn’t always worked. Household brands like Nestle and Kelloggs have had to stop direct store deliveries in the US for specific products because it was turning out to be too expensive.

Apple’s future plans now hinge on the success of this first step. “…scaling online is not that easy, but Apple has deep pockets,” said Everest Group’s Joshi.

 

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