Apple's Next Retail Frontier
Jan 23rd 2012 9:15PM
Updated Jan 23rd 2012 11:58PM
Next: The retail frontier.
These are the voyages of Cupertino, California.
Its 36-year mission,
To explore promising new markets,
To seek out new users and new areas of growth,
To boldly go where only some Macs have gone before.
Apple (NAS: AAPL) has no official retail stores in India. The company's retail stores have been an incredible success, boasting incredibly high sales per square foot, since they were launched in May 2001 despite naysayers and critics. It's about time to address the former.
Currently, prospective buyers within the world's second-most-populous nation have to go to an authorized Apple reseller, shop at the Apple Online Store, or visit small "Apple Shops" that are small stores within stores, similar to those found in Best Buy (NYS: BBY) and Target (NYS: TGT) domestically. Best Buy has been helping retail the Mac maker's wares for years, a smart move on Best Buy's part, while Target and Apple just recently took their existing relationship to the next level.
India has an estimated population of roughly 1.18 billion, trailing China's top-dog 1.33 billion inhabitants. Apple has been focusing a lot on its recent explosive growth in China, albeit with the occasional retail misstep. Recent developments in India are now laying the path for Apple to potentially open up its own retail stores within the country.
Source: Apple.com, Apple Retail Store in Pudong district, Shanghai, China
India's Department of Industrial Policy and Promotion (DIPP) has recently changed its foreign direct investment (FDI) policy, which had previously limited ownership of single-brand retail stores to 51%. The revised FDI rules now allow ownership up to 100%, although any proposal exceeding the prior 51% threshold is required to source at least 30% of the total value of products sold from Indian industries.
The change opens up the country for other global retailers to move in and expand their presence. Apple had been reportedly in discussions with the Indian government for quite some time, with an anonymous official saying, "They have not told us how many stores they will open. We have made the policy. The doors are now open."
On the possibility of the 30% sourcing rule presenting an obstacle, the DIPP official said, "Let Apple finalize its business plan and the investment it wants to make. If they tell us that the 30% sourcing is a problem, at that stage we will look into it." With much of Apple's components coming from Asian electronics suppliers, the rule could potentially present a problem, but the official's comments at least make it seem as if the department is willing to make concessions.
Within Asia, Apple has retail stores in Japan, China, and Hong Kong. A potential retail expansion into India adds another reason why Apple is still a buy.
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At the time this article was published Fool contributor Evan Niu has never been a Trekker. He owns shares of Apple, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Best Buy and Apple. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended writing covered calls in Best Buy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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