In its quest to gain market share in the Indian market, Apple has turned to older generations of its smartphones to lure potential customers. According to a recent report by The Economic Times, the company is selling older models, like the iPhone SE and 6S, on its official website. The company is still pushing the iPhone 5, 6 and SE through its online retail partners like Amazon and Flipkart. The important thing to note here is that the company launched iPhone 5 in 2012, iPhone 5S in 2013, iPhone 6 in 2014, and iPhone 6S in 2015.
The major reason for Apple to sell such old phones, according to the report, is the fact that it is competing with other smartphone makers in a price-conscious market like India. Smartphone makers like Xiaomi, Oppo, Micromax, Gionee and others are selling their products at the margin with comparable specs to that of the latest iPhone in the international market. Apple can’t possibly compete with such prices if it plans to capture the Indian market with an iPhone that can cost even twice as much as current flagships.
We reached out to Counterpoint Research for inputs on this new strategy by Apple. Tarun Pathak, Sr Analyst, Mobile Devices and Ecosystems for Counterpoint explained that India is a critical market for Apple in the long run. He went on to add that the company needs to create a balance between affordability and aspirational factor for the upcoming iPhones. The reason for the balance is the increasing spending capacity of Indian users, where they can spend about $300 to $400 on a new Apple smartphone.
In addition to selling such old smartphones, the company is allowing its retail partners to offer discounts to users, including cashback offers, exchange offers, EMI’s and zero interest offers to entice potential buyers into purchasing old iOS devices. The reason for this push is because the company has lost its lead in China and it is in urgent need of a second market to maintain its growth.
However, the company will have to continue selling its smartphones at a discounted rate because rivals like Xiaomi have announced their plans to double the investment in the Indian market, as pointed by the report. Tarun explained that Apple is not jeopardising the brand as it is selling newer models without any price cuts while allowing retail channels to discount old models according to the shelf-life of the devices.
Another hurdle for Apple is that it is not manufacturing smartphones in India. Apple recently opened a factory in Bengaluru in partnership with Wistron Corp to start making devices in India. Earlier, Apple pointed out that the factory will be a limited operation that will later be expanded into a full-grown manufacturing effort. Despite that, the company could only manage to manufacture 3 percent of the total smartphones that it sold in India. The company needs to ensure that the new portfolio released by the company is sold at an affordable price.
This is difficult since the government of India does not allow import of refurbished smartphones to be sold in the country. Tim Cook, the CEO of Apple has tried to chalk out a strategy so ensure that the pricing of the iPhone comes down so that more and more people can buy the smartphone. However, the negotiations about relaxing restrictions have not worked for Apple as pointed by the report. The absence of a sizable chunk of iOS users in India also results in reduced number of users spending time and money on other services by the company, like the App Store, iTunes and iCloud.