Apple To Change iPhone’s Distribution Model In India

Apple’s strategy to sell the iPhone in India hasn’t quite succeeded. The company doesn’t have its own retail presence in the country due to strict government laws, the iPhone price has been exorbitant, and Apple’s carriers partners haven’t managed to push out iPhone units in great numbers to consumers.

With Apple’s upcoming iPhone 5 launch in India, the company hopes to change some of these dynamics, with the hope that the situation somehow improves. Instead of relying on carriers for distribution, Apple is now partnering with specialised distribution companies Ingram Micro and Redington for reaching out to a much larger market.

From WSJ’s report:

The Cupertino, Calif. company has recently tied up the local operations of Ingram Micro Inc., a large U.S.-based distributor of technology, and Redington (India) Ltd., a local distributor with 12,000 smaller partners across the country, the person said. Redington confirmed that it has added iPhones to the list of Apple products it is selling in India.

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Apple has used both these distributors in the past for products like the iPad, but did not do so for the iPhone as it was concerned that paying third-party distributors would eat into its profit margins on a key product.

Due to regulations in foreign investment in the Indian retail sector, Apple hasn’t been able to sell its products directly to consumers in India, and instead has to rely on distributors and carriers. This multi-layered distribution model eats into Apple’s profits, giving the company very little incentive to focus on the Indian market:

The company’s decision to go through distributors perhaps shows the company is willing to see its margins decrease for now in an attempt to get a bigger toe-hold in India for the iPhone, said G. Rajeev, a senior market analyst with research firm IDC Inc. Samsung already sells its phones through a nationwide network of distributors.

Samsung, and Android in general, have seen a lot of success in India, primarily due to the availability of a wide range of handsets in the $200 to $500 price range. The iPhone lineup, in contrast, started at $400 for the iPhone 3GS and went all the way up to $800 for the 16GB iPhone 4S. With the impending launch of the iPhone 5 in India, the prices of older generation iPhones have of course come down, but they still don’t come close to the sub $400 Android lineup.

(Unlike markets like the US, where carriers subsidise the upfront price of a phone, Indian carriers do not lock in subscribers into a contract, which makes the high priced iPhone even more difficult to sell.)

With a rumored price of $850, we doubt that the iPhone 5 would make a great impact on the Indian smart phone market, despite the moves Apple is taking to ensure greater availability.

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