India is set to get its first Apple Inc retail store in finance capital MUMBAI and IT capital BENGALURU. Tim Cook recently said that the company intends to bring all its initiatives to the Indian market, including retail, as it sees a big opportunity in the South Asian nation where more people will move into the middle class over time and millions of feature phone users will upgrade to smartphones. Yet the final decision has not been taken by the company.
India is the second-largest smartphone market in the world after China. Expanding its market in India seems very profitable for Apple. Apple’s revenue in India grew 20% on year in the January-March quarter, by selling iPhones as well as its computers, which resulted in its overall 16% growth.
Secondly and most importantly the accessibility of high-speed 4G internet at very cheap rates .4G network is roughly used by 432.5 million in India.
What was stopping them?
Apple was unable to launch its flagship branded stores due to a norm that required at least 30 per cent of a single brand retail firm’s products to be sourced locally. Lack of enough local value addition and absence of its sourcing partners here, Apple couldn’t meet the criteria till now.
Since Apple has no manufacturing unit within the country, it cannot avail the Foreign direct investment in single-brand retail. This leaves them with no option but to collaborate with Indian retail agencies. To maintain profit margins, Apple sells the device at a higher price.
UNION BUDGET 2019
Finance Minister Nirmala Sitharaman in her Union Budget 2019 speech, said that FDI inflows into the country have remained robust despite global headwinds. She added that local sourcing norms will be eased for FDI in the single-brand retail sector.
With a view to attracting big players such as iPhone maker Apple, as per the proposal, single-brand retail firms may be permitted to open online stores before setting up brick-and-mortar shops. This can happen if they bring in over $200 million foreign direct investment.
Once iPhones are made in India, the first cost that will go away is the 20 per cent customs duty. It will also create tremendous job opportunities for people associated in the technical domain.
That’s not all. Cost of making iPhones will also come down a bit because of cheaper labour in India. India’s labour cost is estimated at less than a dollar an hour. Whereas the minimum amount to be paid as labour in the USA in 12 $.
Overall setting up retail stores will be beneficial for India as well as for Apple.