Apple Looks to Expand iPhone Distribution in India

Apple is looking to gain traction for the iPhone in India, something that has so far eluded the Cupertino, CA, company. The Wall Street Journal reported that Apple is lining up new distribution partners beyond its existing carrier-only approach in an effort boost its tiny market share in the world's second-most populous country.

Apple in India

To that end, Apple has signed Ingram Micro's Indian operations as a distributor, as well as a local outfit called Redington. Redington, in turn, has some 12,000 distribution partners further down the chain that will give Apple exposure in thousands of small towns across India.

These deals come with a cost, however, as each middle man eats into Apple's margins. In the past, the company has cited the way India does business as a major impediment to growing share. In addition to needing an army of distributors, local regulations make it difficult for Apple to run its own Apple Store, its preferred method for gaining a toehold in troublesome markets.

Push may finally have come to share, however, as Apple's share of the Indian handset market slipped to just 1.2 percent, even while smartphone sales as a whole are exploding in the country. There comes a time when lost margins are outweighed by lost sales, even for a company like Apple where margins are the envy of every competitor on the planet.

Another issue for Apple is the reality that most Indians are poor, and then some. Few can afford a luxury product like an iPhone. Exacerbating this is the fact that India's cell phone market is not based on carrier subsidies like it is in the U.S. and other Western markets. This makes the price of an iPhone exorbitant for many Indians because they must pay the full price of the device up front.

The iPhone 5 will be introduced in India by the end of October. The device will be priced between 45,000 and 50,000 Rupees, or $839 - $933 at Thursday's exchange rate.

Anshul Gupta, principal analyst at research firm Gartner Inc., told The Journal that 70% of the Indian handset market is comprised of sub-$100 devices, almost all of which are feature phones. He also said that Apple's efforts to broaden its distributor system will have a limited effect.

“This may not push up Apple’s sales of phones in India dramatically,” he said. “They will be able to take some more sales, but don’t expect them to sell a million phones in a quarter.”

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