US tech giant will open own web stores within 3-4 months; physical stores to take 18-24 months
With the government clearing the decks for single-brand retail firms to sell directly via online stores thereby changing the earlier norms of having a brick-and-mortar store first, Apple will start its web stores within the next 3-4 months in the country, sources said. However, the company will take a longer time to set up brick-and-mortar stores —around 18-24 months — as these are spread over a large area like 25,000 sq ft. They also need to be located at prime locations and require logistics like call centres, etc.
Industry sources said that the company may take a whole floor in a prime mall or a large space in a premier high street location. Currently, consumers buy Apple products through Amazon and Flipkart, and from physical stores, which are its authorised resellers. Industry sources said that around 40% of Apple’s sales in India is via online channels, therefore, opening web stores first makes sense.
Apple is known for its vast flagship stores globally. For instance, the company has a flagship store located in Grand Central Terminal in New York City. Another one is located at Fifth Avenue in New York City. Reacting to the government’s move to tweak the norms relating to sourcing and opening of online stores for single-brand retail trade, Apple said it is eager to serve customers in India through online and in-store experience at par with its global standards. “We appreciate the support and hard work by Prime Minister Modi and his team to make this possible and we look forward to one day welcoming customers to India’s first Apple retail store. It will take us some time to get our plans underway and we will have more to announce at a future date,” Apple said in a statement on Thursday.
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As is known, on Wednesday the Union Cabinet decided to include manufacturing by contract manufacturers along with the concerned company as well as its sales in the export market apart from the domestic, towards the 30% local sourcing norms for single-brand retail firms having more than 51% foreign direct investment. This will go a long way in enabling high-tech firms set up manufacturing base in the country.
Companies like Apple can now set up manufacturing base in the country through contract manufacturers and use most of its produce for exports under the revised sourcing norms for single brand retail firms. Apple mostly produces phones through its contract manufacturers like Foxconn. As per the policy currently in force with regard to a 30% local sourcing for single-brand retail firms with more than 51% FDI, the local sourcing by Foxconn and its exports were not counted as that of Apple’s. This hugely restricted the high-tech firm from setting up manufacturing base in the country to cater to the export market apart from the domestic.
With Wednesday’s change in the policy, this anomaly has got checked. Now production by Foxconn as well as its exports would be counted towards local sourcing and industry executives said export volumes would be way above 30%.
Tarun Pathak, associate director, Counterpoint Research, said that Apple is expected to shift assembling of all the iPhone models in India in the next one-and-a-half years. Once that happens, the price of iPhones may come down by 5-10% as the company will no longer depend on imports, where it has to pay 20% import duty. “We expect the company will transfer 5-10% benefit to customers,” Pathak said.
Apple’s performance in India has not been very encouraging in the past, primarily because of its pricing strategy and local manufacturing. The company has a meagre 1.2% market share in smartphone segment, although its share in premium segment is 21%, thanks to iPhone XR, which raked in good numbers for the company. Premium smartphone segment comprises devices above rS 30,000. Pathak said going forward, Apple is looking to make India as one of its export hubs.