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Apple cart upset? How OnePlus toppled iPhone as top premium smartphone brand.

Date: 28-01-2019
Subject: Apple cart upset? How OnePlus toppled iPhone as top premium smartphone brand
Earlier this month, Apple made a rather unusual move by cutting its quarterly sales forecast — a first in over 15 years — citing slow iPhone sales in China. India, too, is becoming a difficult market for the technology major to crack. There was a 30-35% decline in Apple’s shipments in India last year on an annualised basis, after it revamped its distribution strategy, and cut down on discounting and differential pricing across channels.

“Till the first half of 2017, Apple was trying to chase volumes with discounted prices, and driving affordability with the older models. In fact, at one point, Apple was selling iPhones for as low as `20,000-25,000,” notes Navkendar Singh, associate research director, client devices and IPDS, IDC India. The company has now consciously decided to go for value over volumes, to avoid the old lower-priced iPhone models from affecting the brand’s positioning.

Higher pricing of new models in India — the iPhoneX costs around `1 lakh in India — the weakening rupee and high import duties have further added to Apple’s woes. Globally, however, pricing is not much of an issue and the market is driven by telcos, with Samsung selling at around the same price as Apple. Singh says what ails Apple in markets like China is its lack of innovation to excite consumers, vis-à-vis other players.

One-upped by OnePlus

In India, almost 80% of the market is ruled by phones that cost around `8,000-12,000 (less than $200). According to IDC India data, Apple had around 2.5% of the market share in 2017, whereas till September 2018, its share reduced further to less than 1.5%.

Experts say the emergence of OnePlus has changed the dynamics of the premium smartphone segment in India. Its strategy to launch two flagship models each year with top-notch specifications has made high-end consumers (those willing to spend `40,000 and upwards) do a double take. While OnePlus mainly competes with Samsung and Huawei, it is also jeopardising the sales of old iPhone models, a worrying factor for Apple in India. Furthermore, OnePlus has been able to build a brand, drive volumes and increase price points of its phones by at least `3,500 with every new launch.
Analysts believe that only Apple is to blame for its troubles. Because of the high pricing, most customers are holding on to their iPhones longer, unwilling to upgrade.

On the flip side, Apple’s new distribution strategy and channel pricing could prove to be a game changer in the long run. “Apple has implemented channel discipline and price discipline, and tied up with fewer retailers. It wants consumers to experience the brand ecosystem. The focus is on services such as Apple Care,” says Tarun Pathak, associate director, Counterpoint Research.
What’s in store

Globally, Apple has stopped sharing volume numbers, instead focussing on value numbers, on services and content — Apple TV, iTunes and app store revenue. However, the India market is different and may not be ready for Apple services yet.

“Apple is a strong and aspirational brand in India. The decline in shipments has given it an opportunity to look into older generation iPhones in a strategic way. How it deals with pricing will be crucial,” Pathak opines. “Also, manufacturing in India can help Apple effectively save 10-15%, which can be passed onto customers.” Furthermore, tapping resellers who can help iPhones reach the tier III and IV markets could prove pivotal.

Source: financialexpress.com

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