Retailers say Apple is forcing them to pay a part – ₹800 per device – of the discount out of their own pocket. Additionally, the company is not compensating retailers for discounts on older inventory, which they had stocked in December at higher rates.
Apple didn’t reply to ET’s queries till the time of going to press.
But an industry executive familiar with Apple’s practices downplayed the rift, saying it was isolated to a handful of retailers and most had welcomed the offer. Retailers had been given enough advance notice and had ample time in December to liquidate older inventory, the person said.
But retail organisations said the discontent was widespread. The All India Mobile Retailers Association (AIMRA), representing 150,000 mobile retailers, and the South India Organised Retailers Association (SIORA), a grouping of 16 including Poorvika and Sangeetha Mobiles with over 3,000 outlets, have written to the company on the issue. ET has reviewed both letters.
Organised retail chains get a profit margin of about 7% on selling iPhones to consumers. In the general trade, the margin is lower at around 4%, said SIORA president TS Sridhar.
“We are also given to understand that member outlets will not be compensated for the inventory held on till date,” SIORA said in its late December letter addressed to Apple India.
‘Contrary to Industry Practice’
Apple, through its distributors, has communicated that part of the discount will have to be carried by the retailers, and there will be no compensation for the older inventory, which was picked up on the basis of the older pricing, said Sridhar.
As a result, its member outlets will face a “huge financial loss”, SIORA said. It added that this is contrary to industry practice – other brands routinely compensate retailers when there is a price cut on mobiles.
AIMRA’s January 6 letter to Apple, along similar lines, said the company’s distributors have forced retailers to stock units beyond their capacity “in the name of low stock availability in future, target achievement, code blocking etc., even after knowing of the upcoming price drop on the product wherein the stock lying on floor is not eligible for a price drop, leading to huge loss to the retail fraternity”.
In protest, several retailers have asked Apple distributors to take the older stock back and re-bill them at the new price. However, the distributors have said that there is no policy of returns for stocks once invoiced.
“Apple had given more than three weeks of advance notice to the partners to clear out the floor stocks, and even the perturbed partners had agreed to the scheme,” said the industry executive aware of Apple’s policies. Such demand-generation schemes are par for the course with the aim of compensating for lower prices through higher volume, the person said.
However, Sridhar said Apple informally communicated the scheme to them only on December 21, 10 days prior to its activation.
Market trackers said Apple had strong sales in December, particularly in the southern states, which should have given the partners an opportunity to clear out existing stocks. January will see even stronger sales due to the harvest festivals, they said.
Apple iPhone shipments reached record levels during the festive season when the company offered older models such as the iPhone 12 and 13 at discounts. The iPhone 13 was the highest selling smartphone in the September quarter, according to Counterpoint Research. Through the sales, Apple was able to increase its market share to 5%, with a leading 40% share in the premium segment.
