iPhone X may go off shelves soon as Apple cuts down on retailer margins

Apple’s iPhone X has seen a huge demand from all corners of the world while the company has been grappling to supply the numbers. Fans of the iPhone X are finding it difficult to get their hands on the new bezel-less flagship, but things look worse for the Indian market. According to a new report, Apple has reduced retail margins on the iPhone X by almost 30 percent, causing many retailers to stop taking orders for the phone as they cry foul.

Both chain owners and small-scale retailers are furious over Apple’s decision to cut margins as it means lower profits for them while the Cupertino giant makes the most out of higher margins, according to a report by The Economic Times. The report adds that Apple’s move in India has caused some retailers like Sangeetha Mobiles, for example, to stop taking orders of the iPhone X. This will further reduce the supply of the flagship in the country which is already seeing a pretty huge demand.

“Apple has cut margins on the iPhone X from 6.5 per cent to 4.5 per cent 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 per cent,” said Subhash Chandra, managing director at Sangeetha Mobile to ET. “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 per cent,” Chandra added.

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.

What the analysts are saying
Analysts believe that this move will be counter-effective to Apple’s focus in India and that it should bring in larger shipments and keep the country in its top priority or risk losing out to its rivals like Samsung, Xiaomi, Oppo and Vivo, among others. “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.

“They (Apple) will have to start now because if they lose a window of opportunity in next two years to be on mind of the growing smartphone user base, it would be somewhat difficult to grow faster in the world’s second largest smartphone market,” added Neil Shah, research director at Counterpoint Research.

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.