Why iPhone Prices Wont Come Down In India..
Are you one of the millions, desperate to grab an iPhone in India but not able to grab one because of its staggering price, Sorry but Apple is not coming to help you.
After a recent slash in Iphone prices in various countries , Some desperate users in India were also excepting a price cut. Iphone currently costs whooping 6 times more in India as compared to US. In India 8Gb Iphone costs Rs 31000 while after recent price cut it only costs $99(Rs 5000) in US, A 16 Gb version costs Rs 37000 in India as compared to $299(Rs 15000) in US. In India Airtel and Vodaphone are sole distributors of the Iphone and both have declined any communication with Apple regarding price cuts in India.
Apple is not learning from it mistakes as it was not able to make its mark when it first launched Iphone in India and were not able to sell even a fraction of the shipments.
There were a huge number of factors due to which Apple Iphone sales never picked up in India:
- Huge price difference ,It costs 6 times in India than in US.
- Bad marketing strategy – Only sold through Airtel and Vodaphone and almost no retail outlets.
- No awareness among people – Almost nothing spent in Advertising.
Now the real Question Why Apple is not slashing prices in India?
Why Apple is not slashing prices in India ,Doesn’t it want to make its mark in India which is one of the largest growing market. Does it want to give up easily when companies like HTC which are trying to make India their niche market.
Its not Apple who is slashing prices mostly, Its primarily At&t(service provider ) who is slashing the prices of Iphone in US . At&T is bearing some of the initial cost of Iphone and are forcing users to take a 2 year At&T subscription plan breaking which users have to pay a penalty. So its like decreasing the upfront cost and distributing the costs into regular payment cycles.
This model cant be adopted easily in India due to lack of law enforcements policies and the time it takes to track and fine a consumer who have breached a contract in between.
Apple may not be the only culprit for the huge upfront cost of Iphone in India but it atleast need to have a look at marketing, advertisements policies, if it wants to make its mark in India specially when it is planning to launch Iphone 3Gs in India.
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The comparison is apples to oranges! I agree that the 31K price is too steep, but it does not cost $99 in the US! Its $99 with a 2 year plan! Where you pay $80 per month!
Why dont you compare some Nokia models? They are free here! Yeah free, but with a 2 year plan!
@Jeetu , I completely agree with you and I mentioned the same in last paragraph. Its the service provider’s who are bringing down the upfront cost and not Apple.
Thanks
Saurabh
There is no price differential of 6-times! It costs $499 for 8GB in US and after customs and export costs, just like any other apple product – multiply by 60 – Rs 30000 + 1000 for Airtel. And there will also be a price cut in India in Aug – Rs 25K, 31K and 36K for 8, 16 and 32 GB versions.
The most important reason, there can’t be low “purchase” prices in India is the dirt-cheap tariff plans that people are used to. An indian iPhone user won’t be willing to pay more than 1/6th the US user pays monthly. Thus Airtel can’t recover the “loan” and so no “cheap” smartphones in India.
It would be interesting to see what type of 3G data plans provided to iPhone users once 3G is launched.
@iphone dev you are right that ARPU is much lower in India thats why plans like those cant work in India secondly due to sluggish legal channel companies fear to adopt such model.
Regarding the 3G data plans BSNL,MTNL have some but there are no takers of those plans due to their high pricing.
http://www.watblog.com/2009/06/03/mtnl-looking-for-3g-subscribers-launches-3g-on-prepaid/
Cheers
Saurabh
In US, though law enforcement is better, I think service providers rely on the fact that cell phones are locked. This model has not been explored in India i.e. locking the cell phone to the provider. Here’s a thought, cut the price down to 10,000 to 15,000 and have a 2 yr contract with 1,000 to 1,500 monthly fee (data and 500 free minutes included).
As long as the customer service is not horrible I am sure people will go out of their way to jail-break the phone.
Issues:
1) Import Duties: Why are cars expensive in India? You can get a Toyota @ Rs. 10 Lakhs in Dubai but 18 lakhs in India. Import duties just kills the manufacturers. Govt. does that a) to get revenues b) to suggest to manufacturers that if you manufacture this in India…it would be much cheaper.
2) Fierce Competition and ARPU – Calculations just don’t add up for Telecom providers. You pretty much can’t charge higher rates, when your competitor is hungry to get that customer for Re. 1 lesser.
3) Cracking Locked phones – Indians are known for cracking things (if it CAN be cracked, it WILL be cracked).
Solutions:
1) iPhone is pretty much a dumb device without internet access. So charging higher rates on internet access and VAS might help.
2) Collaboration with giant mobile content / application providers to subsidize eg: games, videos etc. might help.
3) STOP HYPING the iPHONE…. there are MUCH BETTER (technically and looks wise) phones available which you can use at a lower costs.
BTW: Nokia N97 will give an extremely stiff competition to iPhone and I don’t see a reason why people would still want to buy iPhone.
Thanks Sachin for your comments.
Yes Import Duties,Competition,Cracking are the major issues that need to handled before making Iphone a success.
Regarding the solutions:
) but you cant ignore the viral nature of Apple products ( lucky Apple)
1. Charging higher for internet access: People are not ready to pay even for GPRS and we saw how BSNL and MTNL 3G services failed mainly because of their steep prices.
2.Yes collaboration can obviously help.
3. I agree Iphone has much less features in comparison to its price. I am in love with Android( though I dont have any yet
I guess somebody need to device a new model to make Iphone a success in India, It would be a good case study.
Rather I would say in India chances of Iphone success(I would say craze) is somewhat lesser as people in India always consider the price,features of any product and one which can satisfy people in all the aspects can win.
I dont remember any product which was overpriced, had less features but became viral in India.
Cheers
Saurabh
@Abhilash
Abhilash, AS far as I am aware most of the Apple Phones are locked in India also and this model has been exercised but as Sachin rightly said ever software(even mobile phones) can and will be cracked. You can go ahead and get an Iphone cracked for 200 bucks and if provider sells you for 10K it will have to bear 20K in losses and you dancing with and Iphone for less than 10k
@Saurabh – Please see that you can not sell a Mercedes to a guy who wants to buy a Nano / Maruti.
It’s about positioning the services. May be the market is not ripe or the time is not right yet. If Nokia comes up with a computing device (though they are on track with N97) which is as fast as a PC, in a Mobile Phone form factor, then paying a high price for 3G will not be an issue as at that point you will be paying for your broadband internet connection and not a fancy service for a fancy gadget.
Eg: Reliance and Tata are charging Rs. 2 / MB for their wireless broadband solutions and people are buying it.
If I know, I can replace my Laptop with a Mobile and get almost everything done at the same speed with a Mobile…things change completely. (a far fetch right now)
The competition moves from Phones competing with phones to phones competing with laptops.
@Sachin
I agree on the selling part but Mercedes and Iphones are different things, I have seen users shelling out for Iphones even if it surpasses cumulative salary of two months.Products like Iphone are more about style and fashion statement. If one likes it he will try to buy it.
Yes for 3G it may not be the right time but every time is right for style products.Its more how one markets it even a low interest emi scheme can give a boost Iphone.
You think its a different thing…and more of a style statement… which is fine… however, mass sales does not depend on few individual choices… it depends on mass purchasing power.
@Saurabh
I wrote a post on my blog after reading through your comment. I am reproducing the relevant part here.
I believe that locking the phone is not enough, the locked phone should provide a compelling value so that users do not crack it. If all you provide with iPhone (or any other smart phone like Nokia N97) is basic voice services then users are not tied to network but would try to get phone and move to another network where they can get a better deal. However, if you provide voice plan with a competetive data plan then you start creating value. Add to that the fact that when you crack a phone you lose warranty and run the risk of ruining it. Moreover, if you crack a phone you are locked out of the apps (apple has 50K, Nokia has started the service too) and you do not get s/w updates. All this discourages jail-breaking your phone.
How many people will actually crack an iphone if Airtel/Vodafone starts selling it for say Rs 10K. I don’t know whether any studies have been done on this or whether the phone companies even have the data. Let me assume the worst, now to the next important question, how can companies minimize their losses if they do introduce a scheme like that.
One way to minimize losses will be to look at the existing users and reward loyal users. Start with post-paid users instead of pre-paid. Though, I know of people who are on pre-paid but have been with the same provider for over 5 years, I think targetting postpaid is better as those subscribers have already shown that their willingness to commit. Additionally, target customers who are spending more than certain amount (say Rs 800). Now create plans that will add value to this segment (say Rs 1200 with unlimited data). I believe this strategy has chance to succeed. Even if it fails (i.e. people take the phone and crack it) the cell phone providers will have hard data on how many people actually crack their phones. That data can be useful in deciding how much discount to give on the phone i.e. if a lot of people are cracking the phone price it closer to the current price, but if not many are cracking their phones then lower the price.
With number portability in the near future and growth likely to slow in a couple of years, service providers need to look at ways to lock their existing customers. Providing discounted phones, with a competitive plan is a way to not only retain their subscribers but also to boost ARPU’s.
A couple of people here have mentioned that the model of locking a phone can be explored in India. I think it is impossible to do such things in India. Whatever value the plan brings is immaterial. Locking will do much more harm than good.