Apple has reportedly slashed margins for distributors and upped them for exclusive franchise-run Apple stores to grow iPhone sales in the offline retail space. Apple is also expected to launch company-owned stores in 2020-21.
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Apple India might be looking to alter its iPhone sales strategy in India and increase focus on brick-and-mortar retail channels. Following a management change at the company in India, Apple has reportedly cut down distributor margins for iPhones by more than half. Apple’s India Head Sanjay Kaul was recently replaced by new country head Michel Coulomb following a five-year long sales slowdown.
ET reports that Apple’s distributor margins stand between 1.7 percent to 5 percent and they have been “given distributors specific areas of responsibility to protect those margins. Before this they were free to sell to any trade partner, which meant stock could be sold at a discount online by giving up some of those fatter margins.”
Industry executives also told the publication that margins for Apple exclusive retail stores have been upped to fall between 5 - 7 percent, in an effort to boost offline iPhone sales in the country. Apple is also expected to open company-owned retail stores in India sometime in 2020-21.
"The strategy is to increase sales from Apple brand stores in the country and stop indiscriminate online discounting which distorts brand image," said the industry source mentioned above.
The sales rejig by Apple India could sound a death knell for online iPhone discounts on ecommerce portals like Flipkart, Paytm and Amazon. The online retailers are currently offering marginal discounts and cashback on some iPhone models. Although, the report also mentions that “Online sales account for a little more than half of all iPhones sold in the country.” So, Apple might accidentally end up hurting sales in the absence of online discounts, unless the company creates its own offers for buyers who purchase from physical stores.
"Coloumb is known for systems and processes and wants to bring discipline into the company's sales operation," said the source.
Apple India has not responded to the report.
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