How Apple's first store in India benefits the richest person in Asia
India is poised to soon overtake China as the country with the world's largest population (with some sources saying it might have already happened). And this seems to have caught the attention of the world's most valuable company - Apple - which opened its first two India stores this month in Mumbai and New Delhi (India's financial and political capitals, respectively).
Apple BKC at Jio World Drive in Mumbai
Apple has long been trying to open its own stores in India, as it aims to capture a larger share of the world's fastest growing smartphone market. The company is already a leader in the country's premium smartphone segment (>INR 30,000) and its India sales grew by nearly 50% year-over-year in March 2023, touching almost $6 billion. Apple has also increased its production of iPhones in India, which now accounts for 7% of its total iPhone production (up from just 1% in 2021). The company assembled $7 billion worth of iPhones in India during the last fiscal year (lucky 7, eh?).
One person who has been instrumental in bringing Apple to India is Mukesh Ambani, the richest person in Asia and chairman of Reliance Industries (India's most valuable company). Apple has been partnering with Reliance Jio (India's largest telecom firm by market share) for the latter's 4G network since 2016, and now extends that partnership to the retail industry. The company's first retail store in India, called Apple BKC (Bandra Kurla Complex) is located in Jio World Drive, a mall that is part of the $1 billion Jio World Centre built by Reliance in Mumbai's Bandra Kurla business district. Jio World Centre is a global business and cultural hub featuring a convention centre, public square, garden, private club, cultural centre, and 155 serviced apartments.
Jio World Convention Centre
However, Apple BKC comes with a lot of contractual obligations that will prove to be a long-term win for Reliance. While Apple will pay a rent of INR 4.2 million per month for the ~20,800 square feet Mumbai store, it has already paid a whopping security deposit of ~INR 12 million, equivalent to the first three months rent! Apple has signed a lease for 10 years with a five-year lock-in period, after which the rent will increase by 15% every three years. The deal also includes a revenue share component, where Apple will pay 2% of revenues for 36 months, and 2.5% after 3 years. What is really interesting about this deal is the exclusivity contract in the lease agreement, which states that 22 competing brands will not be permitted to open stores, place hoardings, or show advertisements inside Apple's "exclusive zone" within Jio World Drive. One of those brands was not mentioned, but it's anyone's guess which South Korean company it is. The other 21 brands are some of the most popular technology companies and are listed below:
- Amazon
- Bose
- Dell
- Devialet
- Foxconn
- Garmin
- Hitachi
- HP
- HTC
- IBM (Apple's original competitor)
- Intel
- Lenovo
- LG
- Microsoft
- Nest
- Panasonic
- Sony
- Toshiba
- Twitter (not sure why they would have a store, but I guess you can never predict what Elon Musk is up to)
While it is not unusual for "anchor stores" to insist on excluding their direct competitors around them, such a lengthy list is uncommon for malls in India. This not only seems to be a way for Apple to maximize its return on investment from the store, but also a way for Reliance to attract visitors to Jio World Drive and hopefully convert some of them into customers of its other existing and upcoming establishments on the sprawling 18.25 acres site (namely the convention centre, cultural centre, and serviced apartments). The fact that Apple CEO Tim Cook visited the home of Mukesh Ambani in Mumbai before opening the store is proof of how important this partnership is, and why it might just be a masterstroke for Reliance Jio.
P.S. The working title of this blog was "How the first India store of the world's most valuable company benefits India's most valuable company" :-D
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