Apple has historically led smartphones sales in virtually every market throughout the world. It's indefatigable brand has transcended cultures and borders. But the smartphone giant has been struggling in expanding its iPhone sales in emerging mega markets like India—a market with over 1 billion people.
The good news: iPhones sales in India are expected to double in 2012 from their 2011 levels. The bad news: cellphone sales in India have amounted to just under one percent, with most being entry-level phones, not smartphones.
This underscores the fact that the India market, while large, is still emerging. Handset sales in 2011 were a respectable 11 million, and that number is expected to nearly double this year.
In a recent downer for Apple, market analytics firm International Data Corporation notes that Samsung sold 56.3 million smartphones during Q3 of 2012, giving the company a 31-percent share of the global smartphone market. Apple shipped 26.9 million iPhones for a 15-percent market share.
A recent article in Insider Monkey by David Woodburn notes that one problem facing Apple in new markets like India is price. He indicated that many average Indians simply can’t afford $600 for the 16GB version (about 40,000 rupees) or $800 for the 64GB version. There’s no subsidy program with wireless carriers in India where Apple can charge $200 for its 16GB iphone 5 at Verizon Communications in exchange for a two-year contract. In contrast, handset companies like Samsung Electronics and HTC have succeeded in making their products more affordable in India. Roughly 7 in 10 handsets sold in India last year were priced at under $100. The new iPhone 5, on the other hand, will more than likely retail for about $800 in India this month.
The solution, suggests Woodburn, is to implement a different distribution strategy. Instead of dropping the price or creating a feature-stripped iPhone, Apple is expected to re-deploy its distribution channels to reach more potential users. So rather than working through carriers, Apple will use other sales partners—retail outlets that are not affiliated with wireless carriers.
Apple CEO Tim Cook recently expressed his views about the problems facing Apple in India. "We have a business there and the business is growing but the multi-layered distribution there really adds to the cost of getting products to market," said Cook. He noted that Apple will continue to focus on India, but his "own perspective is that in the intermediate term there will be larger opportunities outside of (India)."
The question remains: Will this strategy work and help Apple boost its market share in emerging markets like India? As a sales manager or sales VP faced with entering emerging markets, could a new distribution-based strategy work for your company? US-based product pricing can be a huge hurtle in such underdeveloped markets.
Photo courtesy of MorgueFile.com
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