New iPhones in a Broader Context
With the release of the iPhone 8 and iPhone X, Apple has once again released two extremely premium high-end smartphones. Costing around $800-$1000, the two new phones seem to be aimed at primarily the middle and upper class. And as expected, Apple will probably see enormous sales as they have with past iterations of the iPhone.
However, even with the new phones, Apple continues to struggle to grab a foothold in the emerging markets, specifically India. Despite growing by 9.7% from 2016-2017, the gross national income per capita in India remains extremely low at approximately $1600. This means that a single iPhone costs more than 50% of the average Indian worker’s salary. Compounded on that is the high cost of a data plan. In order to pay for 500 mb of data, it would take about 17 hours of minimum wage work to do so in India as compared to only 3.5 hours needed in the United States. If Apple wants to succeed in India, they need to be able to adapt to a completely different market, driven by unique incentives and problems.
India is one of the fastest growing digital markets with over a billion mobile subscribers and is expected to add 206 million new subscribers by 2020. Right now, India currently accounts for the highest percentage of new mobile subscribers globally at 27%. In addition, there are over 300 million smartphone users in India and the smartphone penetration is projected to increase from 28% in 2016 to 49% by 2020. Furthermore, the average data consumed by an Indian smartphone user is 4.1GB per month and is expected to go up to 11GB per month by 2022.
Distribution of Smartphone Vendors in India
We know more users will be obtaining smartphones in the near future but what type of smartphones? In 2016, the percentage of smartphones in India that ran Android increased to 97%. iPhone sales in the country fell by 35% from 1.2 million in Q2 2015 to just 800,000 in Q2 2016. Even with a slight increase in 2017, Apple sold just 2 million iPhones in the country, way below its ambitious target of 10 million units.
It is not totally surprising that Indian consumers are looking towards cheaper alternatives to the iPhone given the high cost to salary ratio. In fact, smartphones priced above $300 make up for just 7% of the market. The overall average of all smartphones sold is estimated to be right around $150.
As a result, with the release of new cheaper smartphones, between the second quarter of 2016 and the second quarter of 2017, Chinese vendors Xiaomi and Vivo saw their market shares soar from 3.3% to 15.6% and 2.6% to 11.9%, respectively. IDC finds a similar distribution of smartphones in India as seen below.
While Apple’s inability to adapt to the unique struggles of a price-conscious market will hinder their progress, others will find incredible opportunities in the growing Indian market. For example, many companies like Linkedin and Facebook have developed lite versions of their apps and just a few days ago, Twitter seems to be following suit. These apps are specifically targeted towards the emerging markets where data usage is more expensive and phone networks are slower. All in all, here are three takeaways for those looking to enter the emerging markets
- With a rise in mobile subscribers, smartphones and data usage in India in the next coming years, it is becoming even more important that access to the Internet is affordable and widely available. Data is still fairly expensive in India meaning that even those with smartphones may not be able to afford to browse freely. Bridging that gap is crucial in reaching those consumers.
- Advertisers and app developers should look to India as the next big market. According to PWC, India will outpace overall growth in entertainment and media spending both across Asia Pacific and globally through 2018 with Internet advertising growing at a CAGR of 20.4%. The increase in demand for smartphones along with the development of a digitized society makes India a prime opportunity.
- India’s fast pace of growth also means that their markets are changing incredibly quickly. Consumers’ needs, incentives, and engagement patterns can be extremely dynamic and shift rapidly. It is especially important to keep up to date with market trends and to develop strategically tailored campaigns to effectively reach your target audience.