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Business Home > Companies
 
Apple caps prices in India

Kartikay Mehrotra and Jeanette Rodrigues (Bloomberg) / 11 September 2013

Apple is using the Indian rupee’s unprecedented plunge to lure customers in the world’s fastest growing smartphone market.

The Cupertino, California-based company has refrained from following Samsung Electronics Co in raising prices. Apple is selling the iPhone and iPad to distributors such as Redington India Ltd at the same price as in 2012 even after the currency’s decline this year, Rajesh Khetarpal, head of Redington’s strategic business unit, said.

Apple’s approach to cap prices is key to helping it boost sales in India, which IDC predicts will replace the US as the second-biggest smartphone market by 2017. The largest technology company, facing rising competition from Samsung, was to unveil a less-expensive model at its headquarters yesterday to tap buyers in emerging economies.

“Even though Apple’s margins in India may be adversely affected, volumes are low and this strategy could pay off if stable prices lure new buyers,” said Kiranjeet Kaur, a Singapore-based analyst with researcher IDC. “This could be a wise move in India, especially if competitors increase prices.”

IDC estimates the average selling price for smartphones will fall below $200 by the end of 2013 in the world’s second- most populous nation. The 16-gigabyte iPhone 5 sells for Rs45,500 ($709), according to iStore India, an Apple reseller. Samsung’s Galaxy S4 costs Rs41,500, according to the South Korean company’s local website.

Samsung raised prices in India by about five per cent last month, a company official said, asking not to be identified because the person isn’t authorised to speak to the media.

Apple trails Samsung, Micromax Informatics Ltd, Karbonn Mobiles India Pvt, Nokia and Sony in India’s smartphone market, where IDC estimates shipments almost tripled to 9.3 million units in the quarter ended June. Samsung had a 26 per cent share in the period, and Micromax was No 2 with 22 per cent, according to IDC.

Apple ranked second globally with a 13.1 per cent market share in the quarter, according to IDC, trailing Samsung’s 30.4 per cent.

The competition among smartphone makers has intensified in India, where Boston Consulting Group estimates total consumer spending will almost quadruple to $3.6 trillion by the end of the decade.

“Others have increased prices, but we’re seeing robust growth of all Apple products,” Redington’s Khetarpal said. “So why mess with a good thing?”

Redington first became a distributor of Apple computers and iPods in 2007. It started selling the iPad in 2011 and last year began offering iPhones through its network. In June, the Chennai-based company was appointed by the local unit of Lenovo Group Ltd to offer its smartphones across India.

The iPhone is also offered by phone service providers such as Reliance Communications Ltd to users of its data services. Apple has offered interest-free New Delhi payment plans, trade-in offers and discounted service agreements in India this year.

The strategy of holding prices may not lift Apple’s market share in the country, said Abhay Gupta, chief executive officer of New Delhi-based retail consultancy Luxur.

Consumers looking to buy high-end smartphones choose a device based on their preference between Apple’s iOs, Google’s Android and Microsoft’s Windows operating systems, and cost is a secondary consideration, Gupta said.

“Once customers in this category make up their minds, a few thousand rupees here and there is not a differentiating factor,” he said. “Apple has been fighting a losing battle.”

 

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