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Apple Inc. to Bolster Retail Presence in a Market Growing by Triple Digits

By Daniel Sparks - Mar 12, 2014 at 9:00PM

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Believe it or not, Apple currently doesn't yet have any stores it can call its own in this fast-growing, massive smartphone market. But that's about to change.

As one of the largest smartphone markets in the world and boasting impressive triple-digit growth, India is a great opportunity for Apple ( AAPL -1.17% ). And Apple has a plan to capitalize on it.

"Apple plans to go local with a vengeance," said The Economic Times from its Kolkata and Mumbai offices.

Apple to sell lower-cost, older devices
Apple's newest models are simply too expensive to gain any traction in India. The global average selling price, or ASP, for Apple iPhones was about $650 in 2013, according to IDC. That's a considerable premium compared to the typical smartphone. "IDC data shows 66% of Android's 81% [third-quarter] smartphone share [of global shipments] are junk phones selling for $215," AppleInsider's Daniel Eran Dilger stated politely in November 2013.

Fortunately, selling premium phones means that even older iPhones that have worked their way down Apple's cost curves can sell successfully in markets like India. This is Apple's plan, exactly.

"Apple wants to focus more on its entry-level models in these stores such as iPhone 4, iPhone 4s, iPad mini and iPad 2, which are essentially in the sub- 30,000 [rupees (or about $490 dollars)] segment and also its largest-selling products in India," a senior executive of a leading Apple trade partner in India told The Economic Times.

iPad 2. Image source: Apple

The news follows another report last month from The Economic Times that Apple had planned to reinitiate iPhone 4 production to sell the iPhone in emerging markets India, Indonesia, and Brazil.

Too hot to ignore
Apple had experimented with offering more affordable pricing on the iPhone 4 in emerging markets in 2013. In the company's fiscal 2013 third-quarter earnings call Apple said the iPhone 4 push helped iPhone sales grow 400%, year over year, during the quarter -- far higher growth than any other country mentioned in the earnings call. In Apple's fiscal 2013 fourth-quarter earnings call Apple CFO Peter Oppenheimer expressed again that Apple was pleased with "unit sales up sharply year-over-year" in India.

Beyond selling older, lower-cost devices to attract customers, Apple plans to pursue a more aggressive retail strategy in the country. It plans to set up smaller 400 to 600 square foot exclusive locations in big cities and tier II markets with local resell partners, according to The Economic Times.

"Apple wants to set up these smaller stores in areas where people have high disposable incomes, there's a strong penetration of smartphones and a large student population such as Pune, Vizag, Guwahati, Durgapur and Gangtok," said The Economic Times' Writankar Mukherjee and Sagar Malviya.

Bolstering its presence in such a hot emerging market could help Apple expand its customer base. Considering the stickiness of Apple's ecosystem, building an Apple-branded retail presence in India could pay off for the company over the long haul. Products like the iPad 2, iPad mini, and the iPhone 4 could serve as a gateway product into the Apple ecosystem.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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