Local sourcing waives to give Apple's distribution a leg-up

Now, it can set up its own branded stores in the country as it seeks to capitalise on the new FDI norms

The 30 per cent local sourcing norms relaxed for technology device makers applying for a single-brand retail licence  in  India will put Apple in the driver's seat as far as its distribution strategy goes.

This is because Apple so far has had to depend on a network of third-party distributors, resellers,   multi-product trade channels and e-tailers to push its products in India. This will change now as Apple is expected to set up its own branded stores in the country as it seeks to capitalise on the new norms, multiple sources Business Standard spoke to said.

The chances then of the Cupertino-based firm having greater control over distribution increases as it will have a channel owned and operated by it, industry sources said. This is critical as it seeks to grow its presence in India, where its sales have steadily increased.

“Apple’s own stores will help it control end-to-end experience for users and further help it to take informed decisions about products and services. With initial stores most likely to be opened in metro cities, this will help Apple upgrade its users. It may also initiate fresh promotional campaigns running exclusively out of it stores”, Tarun Pathak, senior telecom analyst, Counterpoint Research said.

In 2015, iphone sales  touched two million, a growth of four times in two years. Apple also holds 42 per cent of the 3.5 million annual premium smartphone market in India, just behind Samsung, which has a share of 46 per cent.

Executives from Apple were not available for comment for this story. But persons in the know say that the firm is now expected to move fast to get its new distribution channel in place. It is unclear though at this stage whether it will appoint franchisees in addition to operating Apple stores on its own.

Globally, Apple has the most number of branded stores in the US at 267, followed by the UK at 39, China at  36, Canada at 29 and Australia at 22 respectively.

While the number of stores in the last four countries may seem small in comparison to the size of these markets, Apple's sales throughput, experts say, is high from these outlets. For instance, it is not uncommon for long  queues outside these stores when a launch is round the corner. Apple stores, say experts, also act as potent branding tools in addition to being key retail  points.

Apple's new-found aggression on the distribution front is expected to evoke a sharp reaction from rival Samsung. The company has already set up a dedicated online sales team under Ashim Warsi, the company's former vice president for mobile and IT. The move was motivated by growing online sale of rival brands including Apple’s in the premium segment during 2015.

Samsung has also crunched launch timelines and cut prices of its premium handsets this year to take on Apple. The firm is already available in over 1.5 lakh retail outlets and is expected to push the curve further there, analysts tracking the company said.