Apple Adopted the 'Refurbished' Strategy in India

Posted by Kirhat | Friday, April 22, 2016 | | 0 comments »

Apple in India
In India, the market for tech gadgets is very competitive and this drove price elasticity and sensitivity for high-end phones upwards.

In order to penetrate and make a dent in India, Apple resorted to the only viable available option left for them: sell refurbished and older models of its iPhone. This could be the only strategy left for the tech company if it really wants to sell its phones in volumes in the country.

According to Kiranjeet Kaur, research manager at IDC Asia-Pacific, the Chinese experience cannot be replicated in India because per capita incomes are not very high in the country. Import taxes on smartphones are also high and the U.S. dollar has been strengthening against the Indian rupee.

Apple has invested in distribution channels in more cities in the country, and started selling old models of its phones. Still, it sold less than 1 million phones for a 3 percent share of the Indian smartphone market in the fourth quarter, Kaur said.

Most of the growth for Apple has come from sales of its older models like the iPhone 4s, said Vishal Tripathi, research director at Gartner. Apple may now be targeting the low end of the smartphone market with refurbished phones, he added.

The new 4-inch Apple iPhone SE, which will cost 39,000 rupees (Us$ 589) for a 16GB version, is unlikely to attract price conscious users, Tripathi said.

Over 25 million smartphones were shipped in India in the fourth quarter, up 15.4 percent from 22 million units for the same period last year, according to IDC data released in February. Samsung Electronics led the market with a 27 percent share, followed by Indian player Micromax with a 14.1 percent share.

But with growth in China beginning to slow down, competition for Apple and other key players is only likely to increase as Chinese players like Xiaomi look to India as the next opportunity.

Apple has applied to the Indian government a second time for permission to ship refurbished phones in India. Its first application was rejected by the Ministry of Environment because of concerns about an e-waste problem the scheme could create because the phones would be close to end of life, according to a government official who declined to be quoted.

The company's refurbished phones are not like any other second-hand phones that are traded in India, but Apple certified pre-owned phones that will have new serial and IMEI numbers, and will ship from Apple's suppliers, according to a source familiar with the situation.

Some of the refurbished phones may come from Apple’s recently launched trade-in program for older phones, Kaur said. Under its Trade Up with Installments program, Apple has recently started offering customers in the U.S. discounts on newer models if customers trade in older versions of their devices, including the iPhone 6.

The potential diversion of these phones to India has raised concerns that Apple is trying to make money from "dumping" old phones from the trade-in program in India, a point the competition has seized on to lobby the government to refuse permission for Apple's plan to offer refurbished phones.

Apple may also fall foul of the government’s bid to boost local manufacture, said a source in government on condition of anonymity. It may, however, try to placate the authorities by offering to do the refurbishing locally.

Some other smartphone companies have been quicker to manufacture locally. Almost one in two smartphones shipped in the fourth quarter of 2015 were locally manufactured, which is expected to increase further as more vendors try to benefit from subsidies and be more price competitive, IDC said.

Apple could make a strong impact on the low-end of the market if it sells refurbished versions of older models like the iPhone 4s at below 10,000 rupees, Tripathi said. People will be willing to buy a refurbished iPhone at that price because of the strong brand image that Apple has in the country. "This is one of the reasons the competition is worried about Apple’s plans," he added.

By getting people to buy Apple phones, the company could also be aiming to get people hooked to the iPhone experience, and hope that people will pay more at a later date for a new phone, Tripathi said.

0 comments

Post a Comment