Apple is the most profitable brand among smartphone makers with over 80 percent of profits. With the launch of $999 iPhone X, the Cupertino-based company is expected to further expand its profitability thanks to higher margins on the device. However, it seems Apple wants to keep all the profits to itself and not pass the benefits to retailers.
According to Economic Times, Apple has reduced the retail margins on iPhone X with an edge-to-edge display and new facial recognition system by nearly 30 percent. The move has affected both large format chain owners and small-scale retailers, who now believe that Apple doesn't want them to profit from the sale of iPhone X. In order to mitigate, major offline retailer Sangeetha Mobiles has stopped taking orders for the new iPhone.
Apple has reportedly cut the margins on the iPhone X from 6.5 percent to 4.5 percent for large retailers like Sangeetha Mobiles and the margin reduces further to 1.5-2 percent if the customer pays by card. "Apple gives the least margins… How on earth do they expect the retailer to work for them for free — our overheads are anywhere around 10 percent," Subhash Chandra, Managing Director at Sangeetha Mobiles told ET.
The cut in margin comes even as these offline retailers battle online players who offer attractive discounts and cashback on purchase of smartphones on their platforms. The report adds that Samsung and Xiaomi offer 12-15 percent margin while Oppo and Vivo offer higher than usual margins with their offline-first approach. Apple's cut in retailers' margins has also affected those in the unorganised trade.
The retailers are also frustrated with the supply-demand mismatch and retailers are complaining they have to face customers ire despite margin loss. A retailer added that it got only 400 units of the iPhone X in the first three weeks since launch, claiming it to be far less than what Apple had promised.
Apple is looking to expand its presence in the premium smartphone segment and it demonstrated the priority by making iPhone X available here as part of the first wave. However, analysts say Apple should ensure adequate supplies and bring India up on its priority list in order to bridge the gap with its Android rivals. During the recent quarter earnings call, Apple CEO Tim Cook said the company's India revenues doubled year-on-year and almost all of the iPhone SE units sold were locally manufactured. The company is also seeking a concession from the government to set up its own retail stores and expand its manufacturing activity.