Apple reported record Q1 revenue yesterday, warning that Q2 iPhone sales may shrink slightly because global economic and social instability is bad for business. Wall Street responded its usual way and abandoned ship.
Wall Street is wrong
Apple already has a strategy for future growth. It has been developing it for years. I explored the importance of connected device proliferation and services provision yesterday, but today I want to explore Apple’s focus on India.
India is the world’s second largest English language publishing market and audiences there prefer smartphones to eReaders when it comes to digital books, according to the London Book Fair this morning. (A big opportunity for iBookstore, services fans).
When it comes to other forms of entertainment, it is significant that more than 67 percent of end-users in India, Southeast Asia and the Middle East use mobile as their primary way to watch movies, music videos and TV shows – the TV is no longer key.
So why would these customers choose an Apple device in preference to eReaders and low cost alternatives? Some won’t, but the truth is that lower disposable incomes in the region means smartphones are often the user’s only computer.
To get the significance of this you must abandon the privileged first world mindset in which the smartphone is a “choice”. In India (and elsewhere) it might be the first computer they’ve ever had.
However, Apple currently holds only a tiny (c.2%) portion of India’s smartphone sales, but this will change this year.
An Apple plan for India
Apple’s rumored plan to launch a 4-inch iPhone 5se will help the company address a wider range of the market. Apple manufacturer, Foxconn, is investing $5 billion in building factories across India where it could make iPhones, hopefully reducing time and cost to market.
Apple’s continued development of services, for example its intention to introduce person-to-person payments via Apple Pay (presumably in India) and its stated intention to open retail stores in India this year help shore up its offer.
Those stores might be situated in one of the 100 smart cities India is building, equipped with next generation services and processes. The country also wants big firms, including Apple, to open for business there. (Apple CEO Tim Cook met with Indian Prime Minister Narendra Modi last year).
India is ready
“I see the demographics there also being incredibly great for a consumer brand, and for people that really want the best product,” Cook said during last night’s fiscal call. “We have been putting increasingly more energy in India.”
As it resolves matters of distribution presence, price and local relevance, Apple already has lots of advantages to convince Indian consumers to buy its solutions, not least its incredibly high customer satisfaction rankings.
Consumers in India already know about Apple’s advantages. “The love for the iPhone is there,” Carolina Milanesi, chief of research and head of US business at Kantar Worldpanel ComTech told South China Morning Post.
The question is if Apple can take the lessons it learned in China and apply them there. "We purposely put the bulk of our emphasis from an emerging market point of view on China to really learn, and then we're going to take that learning to other markets," said Cook in 2011. He’s a shrewd dude.
It’s that kind of leadership which means, even while the commentators and some investors declare the iPhone EOL, Piper Jaffray analyst, Gene Munster, hits us with this prediction: "If the macro headwinds continue to be an issue for AAPL, we would expect it to impact the entire market and would still view AAPL as a relative winner even in a down market environment as we believe tech investors would view the safety of Apple's capital return program as a positive.”
I’m guessing Mac sales in India will also start climbing soon.
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