Price war breaks out between Apple and Samsung in India
Apple and Samsung are locked in a price war in India, with each company handing out discounts on its smartphones in a bid to draw customers in one of the world's largest developing smartphone markets.
The pricing struggle between the two tech giants is said to have kicked off with Apple's decision in early April to give a discount to any customers trading in an older smartphone for Apple's iPhone 4. Trade-in customers now receive a cash discount of at least 7,000 rupees ($128) toward the purchase of an iPhone 4, according to The Wall Street Journal.
Samsung soon countered Apple's move, offering 15 percent cash back for consumers buying a Galaxy Note II, Galaxy S III, Galaxy Grand, or Galaxy tablet. That offer was in conjunction with a prior offer allowing customers to buy those devices on a 12-month, interest-free installment plan.
As the world's second-most populous country, India represents a tremendous market opportunity for both companies. Apple's standard premium pricing structure, though, has presented some obstacles to wider adoption of the company's wares.
To address the issue, Apple recently introduced payment plans for Indian consumers, a decision that led to a threefold increase in the company's sales in the country. Apple is also said to be planning to triple its operations in India by 2015 in recognition of the importance of the market.
Apple's iPhone has moved into second place in the Indian smartphone market, holding a 15.6 percent revenue share. That's a distant second, though, to Samsung's hold on the market. Offering a wide range of handsets at an array of price points has allowed Samsung to grab 38.8 percent of the revenue in India's growing smartphone market.
Since mobile providers in India do not subsidize the cost of smartphones, Apple is faced with a difficult situation in the country. The company's flagship iPhone 5 sells for 45,500 rupees, while Samsung's Galaxy Grand is available for 21,500 rupees.
Industry observers expect that Apple will have to address the issue further by introducing a lower-cost iPhone in the near future. The current low-cost iPhone 4, they say, is just a stopgap measure that allows Apple to build a presence while clearing inventory of older models.
The pricing struggle between the two tech giants is said to have kicked off with Apple's decision in early April to give a discount to any customers trading in an older smartphone for Apple's iPhone 4. Trade-in customers now receive a cash discount of at least 7,000 rupees ($128) toward the purchase of an iPhone 4, according to The Wall Street Journal.
Samsung soon countered Apple's move, offering 15 percent cash back for consumers buying a Galaxy Note II, Galaxy S III, Galaxy Grand, or Galaxy tablet. That offer was in conjunction with a prior offer allowing customers to buy those devices on a 12-month, interest-free installment plan.
As the world's second-most populous country, India represents a tremendous market opportunity for both companies. Apple's standard premium pricing structure, though, has presented some obstacles to wider adoption of the company's wares.
To address the issue, Apple recently introduced payment plans for Indian consumers, a decision that led to a threefold increase in the company's sales in the country. Apple is also said to be planning to triple its operations in India by 2015 in recognition of the importance of the market.
Apple's iPhone has moved into second place in the Indian smartphone market, holding a 15.6 percent revenue share. That's a distant second, though, to Samsung's hold on the market. Offering a wide range of handsets at an array of price points has allowed Samsung to grab 38.8 percent of the revenue in India's growing smartphone market.
Since mobile providers in India do not subsidize the cost of smartphones, Apple is faced with a difficult situation in the country. The company's flagship iPhone 5 sells for 45,500 rupees, while Samsung's Galaxy Grand is available for 21,500 rupees.
Industry observers expect that Apple will have to address the issue further by introducing a lower-cost iPhone in the near future. The current low-cost iPhone 4, they say, is just a stopgap measure that allows Apple to build a presence while clearing inventory of older models.
Comments
45,500 Rupees is $840 - a 30% mark-up on the US price. The first thing that Apple could do is maybe lower its Indian prices a little?
It's not a mark up. There are additional per unit costs that affect the pricing.
Ugh, bring back the Apple flag; can't stand faux glossy.
Quote:
Originally Posted by SolipsismX
It's not a mark up. There are additional per unit costs that affect the pricing.
This is India. The place where everyone outsources to because it's so cheap to do business. Wages are low, the country borders China and one of the official languages is English. Lower prices will increase volume, which in turn will make doing business in India more efficient. It's a virtuous circle.
1) The average wage being low has no barring on what it costs to get an iPhone to a shop to sell.
2) You need to include taxes for importation, costs for the complex line of distribution from Apple to the local independent vendor, etc. To say that Apple is just marking it up isn't even close to a realistic assessment of retail price in India.
I already mentioned this story last week on this forum.
Apple came out with a new pricing model in India, and Samsung, being the apes that they are, instantly aped Apple's move.
As for India, I still don't think that Apple should play along in the race to the bottom game, as Apple will not win that game. India is also the country where they make tablets that sell for about $40.
Apple should just continue to make good phones, and those Indians who can afford them will buy them, and those who can't can take a hike.
Quote:
Originally Posted by RichL
45,500 Rupees is $840 - a 30% mark-up on the US price. The first thing that Apple could do is maybe lower its Indian prices a little?
RichL clearly doesn't understand that the market in India is fundamentally different than the U.S.. Foreign companies are not allowed to own stores or sell merchandise directly and must go through (often numerable) second-hand salesmen who all take a cut. I'm sure Apple is selling them at the lowest price they deem reasonable, perhaps even making less (a mark-down) than in other countries.
1) Your disdain for anyone less fortunate than you is awful.
2) There is nothing wrong with a company adjusting their prices to better compete. Apple has certainly done just that with the iPod because of the 2nd(?) gen Zune.
3) Apple usually doesn't need to lower prices because they already have the lowest equatable price points within each receptive categoruy, save for the iPhone which they have been able to ask higher than their average margins due to the competition being woefully behind in many important areas.
Quote:
Originally Posted by SolipsismX
1) Your disdain for anyone less fortunate than you is awful.
2) There is nothing wrong with a company adjusting their prices to better compete. Apple has certainly done just that with the iPod because of the 2nd(?) gen Zune.
3) Apple usually doesn't need to lower prices because they already have the lowest equatable price points within each receptive categoruy, save for the iPhone which they have been able to ask higher than their average margins due to the competition being woefully behind in many important areas.
(1) Not at all. We're talking business here, not charity. And it is foolish to try and go after customers who have no money. At some point, you just have to draw a line in the sand.
(2) That depends. Look at Apple's stock price. People keep talking about Apple's shrinking margins. Do you think that those margins will continue to shrink or will they grow if Apple keeps making things cheaper?
Quote:
Originally Posted by RichL
45,500 Rupees is $840 - a 30% mark-up on the US price. The first thing that Apple could do is maybe lower its Indian prices a little?
It's $650 US, but the import tax to india has been killing it's pricing. They were building some facilities w/foxcon there I understand to get around the import tax..
Telling people to "take a hike" because they are poor doesn't sound businessy to me.
A lower cost product doesn't mean that margins go down. It's a percentage. Often you will see companies make a larger margin on the lower end of the market than on the high end, but still take in more profit on the high end. A company could find a method to reduce costs thus increasing margins across the board. All that matters is the profit. If you can more profit with lower margins they by all means do it.
Quote:
Originally Posted by SolipsismX
Telling people to "take a hike" because they are poor doesn't sound businessy to me.
I don't have to sound businessy, as I'm not trying to court any customers. On the contrary, Apple should be more selective in choosing potential customers and potential markets to go after. It is debatable if it is a good idea for Apple to listen to all of the analysts and talking heads, and to release a cheap phone, just because certain people are crying out for one and they like to throw around dumb catch words like "developing markets". Developing markets my ass. It sounds like bad business strategy.
Quote:
Originally Posted by SolipsismX
A lower cost product doesn't mean that margins go down. It's a percentage. Often you will see companies make a larger margin on the lower end of the market than on the high end, but still take in more profit on the high end. A company could find a method to reduce costs thus increasing margins across the board. All that matters is the profit. If you can more profit with lower margins they by all means do it.
Maybe Apple can do like some others do, and sell at cost or even below cost. I'm sure that they'll make it all up in volume. What's the end game here? To sell as many phones as possible to everybody in the world? If that's the case, then Apple's current strategy is not a good one. You have to practically give your shit away for free, if maximum penetration is the goal. And judging by how conservative Apple is, maximum penetration is probably a banned word at Apple HQ.
And their Apple Stores should have different doors for different types of people¡
So you've jumped from the well known fact that Apple has lowered their profit margins to Apple should just sell it at or below cost? Can you seriously be that blind to how business works? I'll restart it again, the goal is to maximize profits. It's a pretty fucking simple concept.
Quote:
Originally Posted by SolipsismX
A lower cost product doesn't mean that margins go down. It's a percentage.All that matters is the profit.
Often you will see companies make a larger margin on the lower end of the market than on the high end,
When have you seen this in the phone industry?
A company could find a method to reduce costs thus increasing margins across the board.
Really? As if companies don't have teams of people looking to do this all the time? They are the bean counters and they constantly look to cut costs.
If you can more profit with lower margins they by all means do it.
And if you can't, as Samsung and others can't, then sell higher margin products and be the second largest company in the world with $140 Billion dollars in cash.
Quote:
Originally Posted by SolipsismX
It's a pretty fucking simple concept.
Obviously it is not as Apple seems to be doing that day in and day out. Year in and year out and you still want them to change.
Maybe the people in India need to go to their carriers and complain that they don't subsidize the phone.
Quote:
Originally Posted by SolipsismX
This backs up earlier comments about Apple wanting to make a less expensive model.
It's not a mark up. There are additional per unit costs that affect the pricing.
Such as?
Quote:
Originally Posted by Adrayven
It's $650 US, but the import tax to india has been killing it's pricing. They were building some facilities w/foxcon there I understand to get around the import tax..
Doesn't Samsung have to deal with the same problem, or do they have factories in India?