Apple Eyes Launching Stores In India

Apple Inc. may finally take note of the world's second largest telecom market--India. The company, which has for years ignored India and which currently sells its products here via a franchise network, is planning to launch its own stores in the country.

Apple India has filed with the Indian government an application to open its own branded stores, according to a report in the Indian media. It was not clear how many stores the company was planning to open or what would be the size of its investment. Apart from setting up stores, the company has also filed an application seeking permission to sell its products directly online.

"Apple has been rather cold to India for the past several decades," says Arvind Singhal, chairman and managing director at Technopak, a consulting firm. "There was practically no interest from Apple in India. Even the product pricing in India was ridiculously high and Apple customers in India were getting their products from overseas and the company didn't care."

But with this move the company is signaling that it does, or at least it could, care. Not just to sell more units in India, but to offer the full experience of an Apple store.

"That experience has been missing in India," adds Singhal. "When Apple says it'll open its own stores, it means it's serious about India. This could mean that potentially, in a few years, they may even look at product development and manufacturing in India."

To be sure, in the last couple of years Apple has increased its focus on India and tied up with third party retailers to sell its products and has offered buy back schemes, payment installments and discount on old models to make its products more affordable and reach a wider market. Those efforts paid off as sales crossed a billion dollars for the first time in the year ending March 2015.

Its application now to open its own stores comes after the Narendra Modi-led government eased in November rules for investment in what is known as single-brand retail. (Companies like IKEA , Gap Inc. and Nike Inc. that sell products under their own labels are known as single-brand retailers unlike Wal-Mart Stores Inc. and Carrefour SA which sell products across a range of brands and are hence known as multi-brand retailers.) India requires single-brand retailers to procure locally 30% of the goods they sell in the the country. Earlier, that rule was applicable from the time of the foreign investment. Under the revised rules, that requirement can be met from the time the first store is opened in the country. (To make sense of that, Ikea says it will take it 12-18 months to open a store in India. That means it gets that much extra time to start its local procurement.) More importantly for Apple, the revised rules also say that the 30% procurement rule can be relaxed, subject to government approval, in case of "state-of-art" or "cutting edge technology".

In other words, it's possible that Apple could get an exemption from that requirement and that would help speed up its path to setting up stores here. The challenge for Apple will not be getting the government's blessings for its plans--the Modi government is eager to show that it's moving swiftly on doing business--but for getting quality retail space.

Now that's matter for another day.