To Win Indian Customer, Apple Is Making Old iPhones New Again

It had been months that Varuni T.V., a business professor in India, had her eye on. And Finally, her dream device, a black iPhone 5S, a model Apple Inc. released in 2013, was finally bought by her at the end of May by the 34-year-old.

“It doesn’t bother me that it is several generations old,” says Varuni, who teaches at a college in Hospet, a mining town six hours north of Bangalore. “It’s a good feeling to own an Apple phone.”

And in India, where rivals with comparable specs, including local manufacturer Micromax Informatics and China’s Xiaomi, Oppo Electronics, and Gionee Communication Equipment, Apple needs more people to think that way, where iPhones are struggling against cheaper rivals. In the first quarter, in the industry’s fastest-­growing market, Apple made just 3 percent of the smartphones sold in India. And now in a rare concession for a brand that carefully guards its high-end image, Apple is letting stores and online retailers such as Amazon Inc. and Flipkart Ltd. slash prices for retro models. About 20,400 rupees (about $300) for her 5S at iPlanet, a local reseller was paid in all by the business professor. In comparison, with a starting price of $400 without taxes or fees is the cost of the most similar model Apple that still sells in the U.S.

A clear hint Was taken by Apple. According to Counterpoint Research, of the 2.6 million devices the company shipped to India in 2016, older phones accounted for almost 55 percent. Many retailers in India show the iPhone 5, introduced in 2012, and the iPhone 6, from 2014 even while Apple’s official website for India lists only the iPhone 6S and SE for entry-level buyers. And during an Amazon sale in May, the 5S, which was effectively replaced by the SE, was listed at 15,999 rupees.

While Counterpoint estimates that Indians will buy more than a billion smartphones in the next five years, Apple needs another big market to sustain growth and its $800 billion market value as sales dropped in China.

“We’re very optimistic about our future in this remarkable country, with its very large, young, and tech-savvy population, fast-­growing economy, and improving 4G network infrastructure,” Chief Executive Officer Tim Cook said on Apple’s May 2 earnings call. The company declined to comment for this story.

For fear of environmental damage, India’s government bars the importation of used electronic devices and the country is also trying to establish itself as a manufacturing base. And instead of relying on other retailers, Cook has been lobbying the government to loosen protections so he can sell iPhones in India directly, for more than a year. However, because the government is asking Apple to quantify its commitment to India in terms of capital spending and jobs and hence so far Cook has failed.

Anshul Gupta, research director at market researcher Gartner Inc. says that Cook still stands a much better chance of attracting more Indians to the App Store, iTunes, and other Apple services as long as iPhone prices stay relatively low. “As the premium segment grows in India, Apple wants a larger slice of it,” he says. “The bigger the iOS base, the brighter Apple’s future in India.”

Promotions that are all aimed at making it easier for young Indians to spend a month’s earnings or more on a 5S, retailers have been pitching iPhones with cash-back offers, product exchanges, and monthly payment plans, besides discounts. In order to negotiate with banks and other lenders on behalf of potential buyers, Apple is hiring an undisclosed number of “affordability managers” in the country.

Ayyappan Rajagopal says that exceptional interest has bene shown by customers in smaller towns, who rarely buy pricey phones. Rajagopal oversees smartphone sales at Indian e-commerce leader Flipkart, which sells about a third of the country’s iPhones. “The older models serve as an entry point,” he says. Flipkart lists the iPhone 6 for 24,990 rupees and is promoting a mystery sale of at least 1,000 rupees off for Father’s Day.

(Adapted from Bloomberg)

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