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Apple asks Indian govt to relax FDI in retail norms

Apple-logo(by NT Balanarayan & Vikas SN)

Apple Inc has asked the Indian government to relax the clause in FDI policy that requires companies to source at least 30% of the goods to be sold from local partners, reports Business Standard.

It says Apple’s senior management executives recently met officials in the Department of Industrial Policy and Promotion (DIPP) to find out if an exception could be made for the company as it wants to set up store here.

A senior DIPP official told the publication, “They (Apple) have clearly told us that they cannot adhere to the sourcing norms as they hardly use any hardware for their products. We have also told them that while the government is keen on investments, it cannot make exceptions. However, we can analyse a company’s needs on a case by case basis.”

Remember that while the Indian government allows 100% FDI in single brand retail, it comes with a rider which mandates retail ventures to source 30% its materials locally. This creates a roadblock for Apple which cannot adhere to this clause since it uses minimal hardware for its products. The company has apparently told DIPP that “its iPhones and iPads hardly have any hardware content, while its laptops are assembled products.”

Franchisee Store Model

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To address this, Apple was reportedly asking its exclusive franchisees to redesign all their stores to match Apple’s own retail stores in terms of layouts and fit-outs while reimbursing the entire cost to the franchisee. It was also looking to increase the number of exclusive franchisee stores in the country from the existing 65 stores to 200 stores by 2015.

Apple currently has exclusive stores in India in the form of Apple Premium Resellers, like Reliance Digital’s iStore, Ample Technologies’s Imagine Store, Consolidated Premium Retailers’s iPlanet and Maple Digital Technology International among others. However, Reliance Digital had shut down 16 of its 20 stores over design row with Apple and is now shifting to its multi-brand retail model Digital Xpress.

There were earlier reports that suggested that the company was planning to launch an Apple Store in India after the Indian Government had allowed 100% FDI (Foreign Direct Investment) in single brand retail stores, Apple CEO Tim Cook however had then dismissed this as a rumor and the company has no such plans in India yet.

Marketshare: It is not clear how many devices Apple sells in India as of now, but it had said in November last year that is wants to sell iPhones worth Rs 1,000 crore here. It had also launched a Rs 25 crore ad campaign in India for the iPhone 5s and 5c in partnership with distributors Redington and Ingram Micro, along with telecom partners Reliance Communications and Bharti Airtel.

A Canalys report had earlier suggested Apple had sold 200,000 units and 150,000 units in Q3. Most of this sale was attributed to that of the older 4 and 4s models in India and the three-years old iPhone 4 was sold at a lower price point with zero-interest schemes and buybacks. However, this number should be taken with a pinch of salt since we’ve heard research firms are sometimes way off from the actual numbers. Apple doesn’t provide any official country-wise break-up of its iPhone sales.

Apple has also been pushing for the adoption of its devices in education and had launched iBooks Textbooks and iTunes U Course Manager in India, earlier this year.

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