Retailers rage over cut iPhone X profit margins

pple’s iPhone X has seen production delays causing lower than expected shipments for 2017. As the phone went on sale on November 3, the flagship quickly went out of stock in a number of markets including India. But now, the iPhone X is going to be harder to get for fans in the country. According to a new report, Apple has reduced retail margins on the iPhone X in India by almost 30 percent, causing many retailers to stop taking orders for the phone as they cry foul.

Some like Bengaluru-based Sangeetha Mobiles have stopped taking orders of the new flagship, even as the costliest iPhone ever faces huge supply-demand mismatch in India, leading analysts to say that Apple should slot India far higher in its priority list and bring in larger shipments of the iPhone X.

“Apple has cut margins on the iPhone X from 6.5% to 4.5% for large retailers like us, and if a customer pays by card, which is usually the case, the margin reduces to almost 1.5-2%,” said Subhash Chandra, managing director at Sangeetha Mobiles, which has 400 stores across the country

Apple’s move could hurt its position in the Indian market

Companies like Samsung and Xiaomi, on the other hand, offer more than double the margin, or 12 to 15 per cent, compared to what Apple offers. Oppo and Vivo also offer higher margins to gain share from the market. Offline owners also note that while their margins have reduced, online players like Amazon and Flipkart offer cashbacks and discounts on iPhones, including the iPhone X, that’s causing unfair competition.

While some retail chains have stopped stocking iPhone Xs across their stores in India, those in the unorganised trade are also complaining about Apple’s move to cut margins when supply is already low. “People are ready to give a premium on the phone, so we don’t have an option but to work with Apple’s margin cut and yet, face the ire of customers if the iPhone X is not available,” a leading retailer in the unorganised sector said.

“Apple gives the least margins… How on earth do they expect the retailer to work for them for free — our overheads are anywhere around 10%,” Chandra explained.

Apple declined to comment on the margin cuts and supply issues in India. Industry insiders reveal that typically, brands such as Samsung or Xiaomi offer more than double the margin that Apple offers, around 12-15%. To gain share from competition, players like Oppo and Vivo were also giving higher than usual margins to retailers, but Apple has refrained from this practice.

Further, offline retailers complain that while they are facing the issue of margin cuts, online players are giving cashbacks and other discounts on iPhones, including the iPhone X, distorting a level playing field.

Another top handset retailer said that it had got only 400 units of the iPhone X in the first three weeks since launch, far less than what Apple had promised, underlining the supply issues.

Analysts said Apple should bring India, the world’s second largest handset market after China by volumes, further up on its priority list urgently and ensure adequate supplies, else it may be left with too wide a gap to bridge with its rival Android players like Samsung, Xiaomi, Oppo, Vivo and others already way ahead in terms of volumes.

“India should rank very high on Apple’s priority index… it is yet to have a single owned and operated retail store in India,” said Manjunath Bhat, research director at Gartner based out of Singapore.

Apple in the past has expressed its desire to focus in the Indian market as it sees great potential here. In fact, India was among the initial 55 countries that saw the launch of the iPhone X on November 3.

The iPhone X is Apple’s most expensive iPhone to hit the country yet. It starts at Rs 89,000 for the 64GB model going up to Rs 1,02,000 for the 256GB variant. Despite its massive price tag, fans lined up around the country on November 3 when the flagship went on sale. Apple has faced production issues with the iPhone X as well, which is why it halved the expected shipments for this year. The latest report will no doubt see a further fall in iPhone X units in retail stores as owners refuse to take orders to protest against Apple’s decision.

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