Apple in India: a lost opportunity?

J.J. Valaya is one of India’s preeminent couturiers and is a self-confessed arbitrator and curator of good taste. I know that for a fact because I have known him from the time when he was a student at India’s National Institute of Fashion Technology. If you enter his store, you can see that tasteful elegance on full display. And he also likes gadgets — a lot of them. He walks around with a Samsung Note and a Blackberry Bold(s BBRY).

His Bold is on its last breath so he asked me: what should I buy? Well, since he and I have a similar taste palette, I recommended iPhone 5.(s AAPL) But that didn’t impress him — he said, well, it didn’t feel that different than iPhone 4S. When I asked him if he had spent time on it, he answered in the negative.

And that’s when it hit me — the reason he can’t be convinced was because he had not been able to experience what is quintessentially Apple and what converts a regular person into an Apple customer: the immersive Apple Store experience.

Many phones for many folks

To understand the Indian mobile phone market  — about 900 million total connections — one has to understand that it is literally different strokes for different folks. The low end, budget and medium end of the Android-based(s GOOG) smartphone market is being swept by local brands such as MicroMax, whose Canvas devices are red hot. And there are the no-brand Chinese handsets gunning for that low end. Add two Chinese biggies, ZTE and Huawei, to the mix and you have a lively smartphone marketplace. Sure there is Nokia(s NOK) and Blackberry and Sony,(s SNE) but it is hard to tell if they are doing well or not.

Apple Store in Shanghai

Apple Store in Shanghai

However, when it comes to the top end of the market, it is Samsung all the way. Sure, there is Apple, but frankly it is a distant second. In November 2012, Apple launched the iPhone 5 in India and in the three months ending Dec. 31, 2012, the Cupertino, Calif.-company sold a mere 252,000 iPhones in that country. The data prompted everyone from the Wall Street Journal to Reuters to claim that Apple was doing well in India, but is it really doing well?

Canalys press release 160113 - tableIf you ask me, the answer is no and frankly they could be doing better. Yes, compared to China, India’s smartphone market is puny: According to Canalys data, there will be about 26.5 million subscribers in 2013 (though I get a feeling they are underestimating the potential and demand). But it will grow bigger, and it will grow fast. IDC says the market will be 108 million units in 2016 versus total smartphone sales of 19 million in 2012. In other words, it is a big enough opportunity for Cupertino to wake up and smell the curry.

Samsung side up

I walked around stores in and around Delhi about a week ago, which is where my parents live. And even as a casual observer, it was clear that in India, Apple’s place in the market had been reduced to just another handset. The Samsung Galaxy branding was in your face — from television to in-store displays to the newspapers. The Korean giant was basically everywhere. I had walked into many stores where iPhones and iPads were on display, except they were lost in a confusing array of other phones. (In September 2012 the company partnered with local distributors like Ingram Micro and Redington to get to retailers in smaller towns.)

People want a lot of features on stuff they buy — more buttons, bigger screens, more memory — more is just better, in some parts of the world. And that is why larger phones and hideous phablets are so much in demand. That plus incessant advertising by Samsung has turned the (attention and thus the) conversation away from everyone else, Apple included. Samsung sold 40 percent of the 5.2 million smartphones sold in India in the three months ending December 2012.

Ignorance is not bliss

I am just baffled that a company that would insist that Best Buy(s BBY) and Target(s TGT) create an in-store experience that has some resemblance to the Apple Store outsource its sales to carriers and third parties, who sell phones like a street cart vendor sells vegetables and fast food. My eyes bleed every time I have to enter one of those carrier stores in India. They are the antithesis of the Apple brand.

I am frankly amazed that Apple has left the second-largest mobile market — India, that is — to its own devices. I don’t understand why. It is not that there is a lack of people with money. There are probably more potential customers of iPhones and iPads in India than in say Germany, the U.K. or in the Netherlands. They all have multiple Apple stores, so why not India? When someone asked him last year about company’s strategy in BRIC countries, Apple CEO Tim Cook said that of all the countries, it is likely to go after Brazil after China instead of India and Russia.

And maybe it is time for Apple to go back to the drawing board and come up with a new plan. One that involves opening a handful of Apple’s own stores in India — say in Delhi, Bombay and Bangalore. There are relatively few stumbling blocks. Last year India allowed 100 percent foreign ownership in the single-brand retail segment, which is great for a company that sells its own brand of goods. Apple does just that.

Rachel Lashford, managing director for mobile at Canalys, told the Wall Street Journal, “Until Apple is able to reach lower price points, it will continue to be overtaken by competitors in India.” I couldn’t disagree with her more.

Go ahead be elitist

I admit, that I normally spend most of my time in India in big cities — Delhi and Bombay — but I can tell from the wall-to-wall advertising and all the talk, Indians love their mobile phones as much as their cars. For a certain class of people — the upwardly mobile and the real estate rich — their phones are often a badge of success, much like the cars they drive. For these folks it is either the very best or nothing.

Apple simply has to stop thinking that it can sell cheaper iPhone 4 and iPhone 4S models to Indian consumers. Just like Chinese buyers, Indian buyers are very “badge” conscious and want to get the latest and the greatest. It is time for Tim Cook & Co. to embrace their internal elitist and go for the premium positioning of the brand.

And it all starts with an Apple Store. As far as I am concerned, an Apple Store is the gateway drug to the all-Apple experience. It is where you touch, feel and fall in love with Apple products. The interaction with iPhone and iPad and just the complete retail experience makes you either one of the “fruits” or not. It is also perfect place for up-selling different products.


Fear of an Android (only) nation

I even found the perfect location for the first Apple Store: the DLF Emporio mall, which is arguably is one of the plushest shopping malls in Delhi. This is where wealthy (and I mean crazy rich even by American standards) go shopping for luxury items from Chopard, Gucci, Roberto Cavalli, Chanel and Louis Vutton. The prices there would induce rapid gulps in any sane person, but on my last visit (which was about 10 days ago) I saw people walking with more shopping bags than one sees in say Rodeo Drive. The whole mall was based on the notion of up-selling.

The same buying dynamics — brands as a badge of one’s success — that work in China, work in India too. Imagine if there was an Apple Store right in middle of this opulent (and over the top) building — the iPhones will fly, and so will iPads and Macs. Apple’s brand has a level of luxe associated with it and I think Apple would become the ultimate badge phone.

Otherwise, Apple will continue to lose mind share to the likes of Samsung, which has done a good job of branding itself for the “status symbol” end of the market.  Cook is a pragmatist and I am sure he realizes that it is important to play to win in India. If he doesn’t, then India becomes an Android Nation — it already is, to some extent. For folks like Valaya who should be ideal Apple customers, there is no reason to think about them.