Apple planning to open retail stores in India, held back by regulations: Reports
Apple is reportedly planning to open its retail stores in India, howeve, with the current FDI norms of the country, the company may hold back its plans. The new FDI regulations make it compulsory for all the foreign retailers to source 30 percent of their product sales from the local companies. For Apple, that could be a major problem, as the company’s products are mainly sourced from Chinese suppliers.
According to reports, Apple is now aiming to compete with Samsung and other manufacturers in the emerging markets such as India. The country has over 900 million mobile phone subscribers, and has a rapidly growing market for the smartphones. Apple owns mere 1.2 percent of market share in India, while the Korean manufacturer Samsung leads at 51 percent share. It is believed that the significant drop in price of the smartphones in such emerging markets have driven the growth of Android. Apple, on the other hand, has been selling its devices at relatively high price in the market, and only been able to appeal to the niche customers. But it is being speculated that Apple’s retail stores would change the market dynamics.
The sourcing regulations, however, could be a major hitch unless Apple decides to source more parts for its devices from the Indian suppliers, which many believe is unlikely to happen. Wall Street Journal quotes G. Rajeev, a senior market analyst at research firm IDC, as saying: “Apple sources its hardware from China and it may not be possible for them to change that immediately”. Apple might be able to open its stores in the country if local rules are relaxed, he added. But such relaxation of the laws could take “a couple of years” to be completed.
The WSJ report further says Apple may continue to sell its products with the help of third parties. Its local distributors include Redington (India) Ltd. and the local operations of U.S.-based Ingram Micro Inc. It’s notable that Reliance Retail Ltd., a unit of Reliance Industries Ltd. has a sales and distribution tie-up with Apple.
As per the previous FDI rules, foreign retailers were allowed to own a 51 percent in a store selling self branded good. The rule changed late last year allowing foreign companies to invest 100 percent in such stores.
Apple is not the only the company who will be bearing the brunt of the government’s FDI rules. Amazon recently stepped into the Indian market with the launch of Junglee.com and Amazon Kindle Store. However, the government policy on FDI in retail forbids foreign retailers such as Amazon.com to engage in any sort of online e-commerce activity. The new government regulations restricts foreign retailers to operate through a bricks and mortar store only, and not indulge in e-commerce, with no exceptions. Read our previous coverage here.
Source: WSJ
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