India has historically been considered a low-cost, mass market. But as it has done elsewhere in the world, Apple Inc. is turning popular perception on its head. The growing demand for Apple products shows that India has a significant segment of brand-conscious customers willing to pay a premium for the “right” product.
The numbers tell the story. Apple’s revenues from India doubled for the quarter ended September 2017 compared to the same period last year. Despite a mere 3% share in the overall smartphone business here, Apple could end up No. 3 in terms of sales value, following Samsung and Xiaomi. By the end of the current fiscal, Apple is expected to report sales of $3 billion (Rs 18,951 crore) from India. Clearly, 3 is a significant number for Apple in India! (Incidentally, the Cupertino-based company is No. 3 on the Fortune Global 500 list.)
To be sure, nearly 60% of sales in the last quarter came from sustained promotions where Apple pushed several of its older (and cheaper) products. A big chunk of sales also came from the locally manufactured iPhone SE, an updated version of the iPhone 5. The SE was priced lower than other iPhones but higher than the average non-Apple smartphones in the market. And, unlike in most other markets, iPads contributed significantly to the India numbers.
At the time of writing, stores across the country are readying for the launch of the iPhoneX, the most expensive iteration of the iPhone. Prices start at Rs 89,000, and by all accounts there’s a long list of buyers. Unlike most of the earlier iPhone launches, the iPhoneX will be available in India at the same time it is available to customers in the U.S. and China.
The launch of the X seems perfectly timed. Last week, independent technology analysts Canalys said that India has overtaken the U.S. to become the second-largest smartphone market in the world, trailing only China now. For the third quarter ended September 2017, mobile phone shipments to India grew 23% over the previous year, to 40 million units. Apple wants a bigger slice of this.
Replying to a question while announcing the quarter results, Apple’s CEO Tim Cook said the company is making “good progress” in India and is “gaining understanding of the market”. Of course, he added, Apple has “a long way to go” in India.
Apple’s success in India is on the back of a growing segment of affluent spenders. In a study on Indian consumer spending released in March, Boston Consulting Group estimated that from 2016 through 2025, the share of the top-income categories (they call them ‘elite’ and ‘affluent’) will increase from 8% to 16%, while the share of lower-income spenders (the ‘strugglers’) will fall sharply from 31% to 18%. In terms of spending too, the elite and affluent will become the largest combined segment by 2025, accounting for 40% of consumption compared with 27% in 2016.
Other indicators are also positive. Last December, India hit a 10-year high and stood first among the 63 nations surveyed in the global consumer confidence index. India’s economic growth and rising household incomes are expected to increase consumer spending to $4 trillion by 2025, with the maximum spending likely to occur in the food, housing, consumer durables, transportation, and communication sectors. And this is what Apple wants to cash in on.