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With little differentiation between previous-version devices and the latest flagship devices, Apple’s smartphone market share in India could increase. Photo: Reuters
With little differentiation between previous-version devices and the latest flagship devices, Apple’s smartphone market share in India could increase. Photo: Reuters

Apple’s new launches: Potential impact on the Indian market

The new products are expected to have an incremental impact on business; adoption of previous-generation iPhones in the $400-500 segment could increase

Apple Inc. has improved its iPhones on multiple fronts including a slick hardware design, faster processor, better resolution displays and significantly improved camera modules. Together, all these improvements in the latest iPhone 6 and Plus are designed to provide a great experience to the user.

But unfortunately, from a mainstream consumer’s point of view, these improvements are incremental and not compelling.

The biggest challenge for the company is to entice consumers to upgrade to new devices. And, this is not just an Apple problem; it is an industry issue at large.

The rate of innovation in the smartphone industry has slowed, with decreasing number of substantial improvements from one device to the next.

Apple has introduced a new sensor in the iPhone’s camera module. And, it has already introduced a new biometrics sensor (for Touch ID) in the previous generation of the device.

Apple Watch

The next set of innovations in smartphones is expected to be in the sensor space. Most importantly, sensors working in tandem. And, tandem-working sensors are fundamental for wearable computing.

The Apple Watch (the first device category launched by Apple in the post-Steve Jobs era) is all about “design" (like all first-generation Apple devices). The company has invented a few innovative input methods for the Watch—a digital crown and force touch—to focus on the user interface (again, trademark of first-generation Apple devices).

However, there’s a rule of thumb among Apple fans—when the company introduces a brand new category, do not buy 1.0—wait till the second or the third versions.

The first iPod was heavy, expensive and was usable only through a Mac, the first iPhone did not have Bluetooth, message forwarding and various other hygiene features (available in mobile phones at that time), the original iPad was heavy and clunky. Apple Watch, in its current avatar, is a nice-to-have accessory to an iPhone, but not a compelling stand-alone device.

A significant portion of Apple Watch’s success depends on the creativity and rate of growth of third-party apps. The watch does not have a camera (which is available in some Android-based smart watches), so this means all the photo- and video-based apps have to wait for a generation or two.

But most importantly, Apple did not elaborate on a key user input method—voice. Voice-based input on wearable devices is a key usability factor and this is where Google’s Android ecosystem with Google Now (a self-learning artificial intelligence engine) has an edge over Apple’s Siri.

Having said that, Apple is known for learning fast and iterating at tremendous speed. And, I think the third generation of Apple Watch will be a compelling device, completely different than the one launched on Tuesday.

Apple Pay

Apple Pay is the most promising product launched on Tuesday. The mobile payments space is on the verge of take-off, and Apple’s entry will provide the necessary impetus for the formation of a strong value chain and structured growth of the ecosystem.

In the past, many players across industries including banks and credit card companies, Internet companies and even mobile carriers have tried to launch mobile wallets.

But none of them were hugely successful, primarily because they failed to formulate strong partnerships and establish a value chain.

Apple has partnered with three of the largest credit card companies (Amex, Visa and Mastercard) and leading retail chains (including Target, Walgreens, McDonalds, etc.). Apple Pay will be available in over 220,000 retail outlets at launch.

And, most importantly, Apple has chosen widely available and standardized NFC (near field communication) technology over its own iBeacon for Apple Pay. This will enable Apple to ride on the existing (and growing) NFC ecosystem. Retailers need not invest in another point-of-sale terminal.

Apple with Apple Pay has the potential of growing the digital payments industry in a structured way, just as it enabled the growth of the digital music industry with iTunes. The 4.5% rise in Apple’s stock within minutes of Apple Pay announcement and over 2% fall in eBay’s stock (Apple Pay directly competes with eBay’s PayPal) is a testimony that Wall Street welcomes Apple Pay.

Implications for the Indian market

In India, the new products are expected to have an incremental impact on Apple’s business. Apple could potentially witness increased adoption of its previous generation iPhones (5, 5C and 5S) in the $400-500 segment.

With these device prices reduced and from an Indian consumer’s point of view, little differentiation between previous-version devices and the latest flagship devices, coupled with Apple’s aspirational and iconic brand status and Apple India team’s distribution expansion and consumer reach initiatives (such as discounts, EMI, buyback and back-to-school schemes), I foresee an increase in Apple’s smartphone market share in India.

As far as the adoption of new products is concerned, India is a follower market.

In the smart devices space, India is at the beginning of significant growth. While smartphones growth is maturing in most of the global markets, in India it is about to take off (with less than 20% mobile phone owners currently using smartphones).

Although available for close to four years, tablets are yet to witness mainstream adoption in India.

For any new product category, consumers in India need to be adequately educated and excited on its value proposition(s). And, many global companies are unwilling to expend resources on growing the India market during the early stages of new product category evolution. This is primarily because there exist a number of Indian and Chinese brands who are willing to capitalize on consumer education (done by global companies) and offer sub-standard products at significantly reduced cost.

In the medium-to-long term, this is detrimental to both market and product evolution. We witnessed this phenomenon in the tablets space. And, this is the reason I expect Apple Watch to witness minimal adoption in the short-to-medium term in India.

With three product launches, Apple has strengthened its position in a maturing industry, and marked its entry into a new category. I expect in a couple of years, Apple will be able to establish the cool quotient, the market, drive competition, create an ecosystem, trigger clones, and drive mass-market adoption of smart watches.

But, for now, I think it is safe to say that Swiss watchmakers are in the clear… for now!

(The author is founder and partner of research firm Convergence Catalyst)

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