The Crumbling Apple Pie

We have been an Apple family since 2010. We have 4 iPhones, 2 MacBooks, 2 iPads an iMac and 2 iPod’s. Recently my 17 year old daughters hand me down iPhone 5S needed replacement – it was slow and the 16 GB was just not enough storage. It was logical to expect that she would ask for an iPhone iPhone 7 or 8 – but to my surprise she wanted an Android Phone. She had compelling reasons – It’s half the price, has a big screen, is super fast and has a lot of storage. Add to that she never used the Apple Ecosystem.

That summarises the story of Apple in India. A Niche brand that had a 2% market share in the Smart Phone Market (In 2014) with aggressive plans is now seeing a steep de-growth. As per Counterpoint research the company had a 1% MS in Q2 2018 and unit shipments for 2018 are expected to be 2.4M ( 2017 – 3.2M Units)*. But before we comment on Apple India struggling lets look at the big picture.

Most of us remember the amazing launch presentations of Steve Jobs when he literally pulled out a rabbit from his hat. Be it the iPod from his hip pocket or the MacBookAir from an envelope – Steve was a marketing genius.

Steves Keynotes during the New product launches including his last Keynote at WWDC in 2011 attracted attention like the Grammy’s & Oscar’s. The craze was global even if Steve’s focus was largely the Western Economies. At every launch there were huge Q’s lining up the stores and product availability was always a challenge. He genuinely Exceeded Expectations – both with his presentation and the Product.

Compare that with the launch on Sep 12th this year by the current CEO Tim Cook. The big takeaway was the launch of Dual SIM iPhones. Sadly this feature was launched in 2000 by Benefon and became popular from 2010 – 2011. As of mid 2014 almost 60% of Smartphones sold in India were Dual SIM phones. So the worlds most innovative Phone company launches a feature that is 18 years old.

Since Steve Jobs that has been the summary of Apple launches. Lots of colours, numerous models, better camera, better resolution – but hardly any innovation on technology. And the question that begs to be asked is a 58 year old Tim Cook out of touch with technology in an industry that is run by 30 – 40 year olds (Mark Zuckerberg 34 , Sundar Pichai 47, Elon Musk 47). Yes he is a brilliant operations and financial wizard – and with dexterous buy backs and steep priced products has ensured that Apple’s profitability and stock price continue to rise against all odds.

The question that needs to be asked is how long can this continue? Is it a case of Gaining Momentum – Losing Altitude? With declining sales in Mac and iPads and the Apple Watch a very niche product sold mainly in US & W Europe – Apple has relied heavily on the steep prices of the iPhone.

A few years back iPhones in India were launched at a 40 – 50K INR pricing. That was steep – but this year the most affordable product the iPhone XR will be launched at Rs 76,900. While the premium range retails for 1 Lac – 1.34 Lacs. With that pricing you cannot attract the youth brigade.

When Tim Cook met PM Modi in May 2016 – there was a high level of expectancy that this was the moment when the worlds largest tech company would shift gears and accelerate. But sadly little has transpired – and things have gone from bad to worse – a steep erosion of market share in the last 2 years.  

While Apple operates a basic facility with its partner to assemble a few models of iPhones in India, Samsung has set up the worlds largest Smart Phone manufacturing plant in India in July 2018. That makes business sense as it saves the company 20% Customs Duty. And with the raging USD one can expect import duties to get steeper.

They quickly followed it up with the launch of the worlds largest retail outlet at Bangalore spread across 33,000 feet that was launched in Sep 2018. Now that is a commitment difficult to meet. 

The decline in Market share for Apple India also reflects in  the ramping down on operations from five national distributors to two. Many retailers across the country have been forced to close shutters with dwindling volume of sales.

The Apple Ecosystem – a Key differentiator has failed to engage audience in India. Most youngsters use platforms like Wynk to listen to music and movies are streamed from Netflix and Amazon Prime. Apple TV is almost never in the consideration list when you decide to buy a streaming device. Apple maps is almost never used. The lack of adoption of iTunes and the Ecosystem has been the biggest setback to Apple India. This ensures that there is no  stickiness and hence the retention rate of existing iPhone users which worldwide is stated to be over 90% is a lot lower in India.

Indian retail is always a challenging market – and India has once again proved to the worlds greatest tech company that success here doesn’t come easily. Companies that don’t adapt to the needs of the country are bound to fail and Apple is a good example.

The End 

* References 

Spread A Few Good Things
  • 143

02 comments on “The Crumbling Apple Pie

  • Chander , Direct link to comment

    Very thoughtful writeup. Understand Apple is going to discontinue the 6 and even the lower priced model like the SE. At a later date we may see an upgraded version of SE for the Indian market.

  • Subhasish Biswas , Direct link to comment

    Very aptly put. I also moved away from Apple mainly for price. Can’t afford anymore and getting similar features with lesser money. May be quality is not as good as iPhone but good enough for me. Hope someone from Apple is reading your blog…

Leave a Reply

%d bloggers like this: