Apple 2.0

Covering the business that Steve Jobs built

iPhone disconnects in India

November 13, 2008: 1:54 PM ET

india-iphone-newIndia may have the world's fastest growing wireless market, but Apple (AAPL) didn't set its hopes particularly high when it launched the iPhone 3G there in August. It reportedly shipped only 50,000 units to its partners on the subcontinent, with plans to double that number by the end of the year.

If so, those partners may have a lot of unsold iPhones on their hands come January. According to a long postmortem published this week in the Delhi-based newspaper Mint, Apple has sold only 11,000 iPhones in India, a country of 1.14 billion that buys 8 to 10 million cellphones a month.

"IPhone's launch in India has been dubbed the biggest failure of a top-notch brand from a well regarded company in recent times," wrote Priyanka Mehra and Shauvik Ghosh in a piece that underscores the difficulty of adapting Apple's U.S.-based smartphone strategy to markets around the world.

Price, according to the authors, is only part of the problem. Although most Indians buy cheap cellphones on a pre-paid basis, there were plenty of potential customers who could afford the 31,000 rupees ($716 at the time) that Bharti Airtel and Vodafone Essar were charging for the 8GB iPhone. According to Mint, Nokia (NOK), Samsung and RIM (RIMM) are all doing good business in India selling smartphones that cost even more.

But Steve Jobs had announced before the launch that Apple would be priced at $199 globally -- less than 10,000 rupees -- a promise he couldn't deliver on in India because local cellphone companies don't subsidize cellphones with lock-in clauses the way carriers routinely do in the United States and Europe.

"This built a false hope in the minds of those consumers who wanted to buy it and turned away those who could have actually bought it," Prathap Suthan, creative director of advertising agency Cheil Communications India, told Mint.

Moreover, he says, Bharti and Vodafone, lacking experience in the complex Indian retail environment, dropped the ball in terms of marketing and distribution. By selling iPhones exclusively at their own outlets, they've antagonized the big retail chains that dominate the market in India.

"A brand like Apple need not be told that an iconic product needs iconic advertising, a solid marketing push," says Suthan, "The company failed to strike a connect with Indian consumers."

For more of Mehra and Ghosh's analysis, see livemint.com here.

[Thanks to Chris Foresman at Ars Technica's Infinite Loop for the link.]

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Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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