Apple has been itching to open an Apple Store in India for a while now, but the company has been unable to do so due to a rule that states that retailers are required to locally source at least 30% of the goods sold in company-owned stores. This is no longer the case however, as the Indian government has announced that they will be easing said requirements in an attempt to boost foreign direct investment.
The easing of the local sourcing requirements will give single-brand retailers a three-year grace period in which they can operate stores. Once the three years are up, those stores would then have to comply with the local sourcing requirements. Should the company be able to prove that they are selling state of the art or cutting edge technology, they would receive a five-year extension to the relaxed local sourcing requirements.
Basically, this requirement would allow Apple to operate their own retail store in India for three years without any requirements. Once those three years are up, Apple would then have to prove that 30% of their store inventory is locally sourced. If they are able to prove that they are selling state of the art products, Apple would then be able to operate their Apple Store without any requirements for another five years. Simply put, Apple may be able to operate their Apple Store without needing to adhere to the sourcing requirements for a maximum of eight years. Once those eight years are up though, the sourcing requirements would go into effect.
Currently, Apple has been selling its products through partners such as Redington India td. as well as retail units of Indian conglomerates Tata Group and Reliance Industries Ltd.. With the relaxed ruling, Apple can now apply for permission to open its first stores in India. “The relaxed rules give Apple a window to build up a credible brand and gives the company a chance to build up internal capability and familiarity with the supply base. For branding, a certain consistency is critical and this can be done by having retail control,” says Devangshu Dutta, Chief Executive Officer or Third Eyesight.
Source: Bloomberg
