Hey guys it’s Greg with Apple Explained
and today we’re going to be exploring all the challenges Apple has been facing in India. Because Apple had some ambitious plans to
grow their revenue in the region from one billion in 2015 to 5 billion in 2020. But this has proven difficult to achieve. Because in 2018 Apple failed to meet their
revenue target of four billion, only managing to generate 1.8 billion from the country. And there are a few reason for this that I’ll
cover in the video. Now even though this topic was third in last
week’s voting poll, I have been getting more requests for this video than anything
else I’ve ever done. So thanks for your feedback because it’s
the main reason why this video was made. Now if you want to vote for the next topic
don’t forget to subscribe, that way the polls will show up right in your mobile activity
feed and you can let me know which video you’d like to see next. Now it’s always been challenging for Apple
to break into the Indian market, and it’s no different with the iPhone. So let’s start with one of the biggest reasons
why, and that’s its high price. And if you’re in America you’re probably
thinking yeah the iPhone is expensive here too. But it’s actually even more pricy in India,
since the country adds a 20% tariff on foreign-made smartphones which means the starting price
of an iPhone XS is over $1,400. And considering 95% of all smartphones in
India cost less than $500, this puts Apple’s flagship phones in the ultra-premium category. In fact, the ever increasing prices of flagship
iPhones in India have caused a gray market to develop. Where customers will fly to Dubai, purchase
an iPhone XS, come back, and saves hundreds of dollars compared to buying the phone it
in India. In fact, in 2018, a man was arrested for trying
to smuggle 100 iPhone X’s into India from Dubai, worth about $120,000. And despite Tim Cook actually visiting India
back in 2016 seeking tariff reductions, the government has only made it more expensive
for Apple to sell to customers in India. Now you also have to keep in mind the average
salary in the region, which is about $1,670 a year. And this may sound ridiculously low, but the
purchasing power of an Indian Rupee is much higher than the conversion rate suggests. But it still isn’t enough for many people
in India to buy a smartphone. Since only about 25% of the population actually
has one. And that’s a big reason why Apple wants
in on the Indian market so badly, it’s one of the few regions today that isn’t experiencing
smartphone saturation. But like I said before, their plan hasn’t
been going so well. The iPhone currently accounts for just one
percent of the smartphone market in India. Down from two percent in 2017. And if that wasn’t enough, Apple’s India
team has been collapsing. Because in 2018 the team lost three executives,
the chief of national sales and distribution, the head of its commercial channels and mid-market
business, and the head of telecom carrier sales. And because of these departures, Apple’s
Indian sales team had to be reorganized. But not much could be done to overcome India’s
harsh tariffs. The country is trying to force more companies
to manufacture domestically to help employ their large population and boost their economy. And although this strategy is controversial,
it has paid off for the country in a few ways. It resulted in Samsung and Xiaomi setting
up factories in the region, and Apple has actually contracted a Taiwanese manufacturer
to assemble the iPhone SE and 6S in India. But the company never made a move to build
their higher end XS and XR models until very recently. Because Apple executives plan on meeting the
Indian Commerce Minister at the World Economic Summit later this month. So we’ll have to wait and see if they come
to any agreements. Now you might be thinking, if the iPhone isn’t
popular in India, then what smartphone is? Well, Xiaomi’s Mi phones have the largest
slice of India’s smartphone marketshare, at about 31%, with Samsung coming in second. And it isn’t hard to figure out why, since
customers in India can get their hands on the Xiaomi Redmi 5A for just $100. That’s a fourteenth of the iPhone XS’s
price. In fact, a manager of a local smartphone store
in India said that the average budget of his shoppers was about 10,000 rupees, or $150. But Apple’s lowest priced iPhone model,
the SE, cost almost twice as much. So it’s clear that Apple needs to focus
on providing affordable smartphones to stand any chance in India. But this is about more than just the iPhone’s
high price. Because if you actually go to Apple’s India
website, you’ll notice a strange category in the header titled “Where To Buy.” Which is where the company sends you every
time you try to purchase something from their website. And this brings me to another huge problem. There’re no Apple Stores in India, retail
or online. only authorized resellers. So that means it’s impossible to buy directly
from Apple if you live in India. And if you know some Apple history then this
probably sounds like the Macintosh all over again. Because before there were Apple Stores, Mac
computers were sold alongside cheaper PCs in places like CompUSA, and the salespeople
weren’t educated about what the Mac could do or the advantages it had over other machines. So PCs were almost always recommended to customers,
which negatively impacted Macintosh sales. But once Apple started building their own
stores, they were able to supply the product knowledge and retail experience needed to
promote sales of their products. And I think we might be seeing history repeat
itself when it comes to the state of Apple retail in India. In fact, Apple is applying the same store-within-a-store
model to smartphone retailers in the region, with specially trained staff to help sell
their iPhones. But this may not be enough, since Apple can’t
offer other valuable retail services like Genius Bar technical support and Today At
Apple sessions that they do in other countries. And there are some major inconveniences that
come with being in a country with no official Apple support. Because although Apple authorized service
centers exist, they aren’t required to honor any of Apple’s repair or replacement programs. For example, when the iPhone battery replacement
program was going on, there were customers in India waiting almost an hour at authorized
service centers to get their iPhone batteries replaced. But many of them were told their particular
model wasn’t cover under the program, even though Apple support told them it was. So customers were forced to visit different
service centers in order to find one that would actually perform the battery replacement. Now if you take a step back and look at the
entire experience of owning an iPhone XS in India, you begin to understand why it doesn’t
make sense for most customers. Because you’re spending more on a smartphone
that receives less quality customer support than virtually any other country on earth. And that isn’t even considering the features
that aren’t supported, which I’ll get to later in the video. And that’s exactly how India wants it to
be. Because if you aren’t supporting their citizens
or their economy, they don’t want you to be successful in their country. So it’s no surprise that 96% of smartphones
sold in the region in 2018 were manufactured in India. And if you’re wondering why Apple doesn’t
just start building their own retail stores in India, it’s because they’re limited
by government restrictions that require foreign retailers to buy at least 30% of their manufacturing
materials from Indian vendors. But since Apple buys most of their components
from other places in Asia, they don’t meet the requirements to build retail stores in
India. Now Apple initially hoped to turn this around
by convincing the government to exempt them from these restrictions if they promised to
manufacture in region at some point in the near future, but they refused. So it appears the only way Apple can bring
their stores to India is to establish a large manufacturing presence in the region and source
as many materials locally as possible. But this would be a huge investment in money
and resources from Apple, since they’re not entirely sure what kind of return to expect. Because even if they are able to avoid India’s
smartphone tariff, it likely won’t lower the iPhone’s price enough to encourage significantly
higher sales. So some people think Apple should create a
super budget smartphone that would be manufactured and sold exclusively in markets with lower
price points. But what kind of smartphone would these budget
customers want? Well, let’s start by taking a look at the
best selling iPhone in India today. And it’s not the SE or 6s, it’s actually
the 6. Apple unofficially relaunched the iPhone 6
in India and China back in 2017 at a price of about $400. And although the technology is over four years
old, it’s the only iPhone in India price below $500 with a larger screen. And that’s the feature that made it so much
more popular than the smaller and often cheaper SE, despite the fact that you can’t even
find it on Apple’s India website. But there’s more Apple needs to consider
than simply hardware. Because some of their software features are
either useless or don’t exist in India. For example, Apple Maps doesn’t support
navigation and is missing even the most basic points of interest in the country’s major
cities. Siri still struggles to understand Indian
accents, and it can’t give you any information about local restaurants or movie theaters. And Apple Pay has never launched in India
despite Samsung Pay being available for over a year. So to me, it appears Apple’s strategy in
India has to be multifaceted. They have to offer an attractive $300 phone
that’s manufactured in India, but they also need to establish a clear presence in the
country with their own retails stores to provide satisfactory customer support. And if they don’t have all their major software
features working well in the country, it’ll give their competition the opportunity to
make a more useful and appealing device. Now all of that is much easier said than done. And it’s going to take years of strategic
planning to succeed in the Indian market. But I think there’s definitely a path for
Apple to finally become a major player in India. Now I want to thank Skillshare for sponsoring
this video. They’re an online learning community with
thousands of classes in video production, editing, and design. So if you’re trying to start a YouTube channel
I highly recommend their premium membership, because it’ll give you unlimited access
to high quality classes from experts who actually know what they’re talking about. So you can get better at SEO, video editing,
thumbnail creation or shooting footage, and those are the kinds of skills you need in
order to create a successful YouTube channel. For example this course on video production
helped me figure out how to come up with good video ideas, how to capture high quality audio,
and how to edit my videos quicker than ever before. Skillshare is also much more affordable than
other learning platforms out there, since an annual subscription is less than $10 a
month. So if you’re interested in seeing what you
can learn from skillshare, be one of the first 500 people to click the link in the description
and you’ll receive two months of Skillshare Premium for free! Alright guys so that’s Apple’s India Problem,
and if you want to vote for the next video topic, don’t forget to subscribe. Thanks for watching, and I’ll see you next
time.
