Apple’s entry into the Indian retail market has been a topic of discussion for years, and the company finally made its way in through an 11-year deal with Mukesh Ambani’s Jio World Drive Mall. While the deal has raised eyebrows due to its strict clause prohibiting 22 of Apple’s competitors from displaying advertisements or occupying space within the mall, it’s important to look at the unit economics behind the deal to understand Apple’s strategy in India.
The monthly rent for the 20,800 square feet space within the mall is ₹42 lakh ($56,100). Additionally, the revenue share for the first three years is set at 2%, with a rent increase of 15% every three years. Assuming a monthly sale of ₹3 crore ($400,000), the monthly revenue share for the first three years would be ₹6 lakh ($8,000).
After the first three years, the monthly rent would increase to ₹48.3 lakh ($64,600), and the revenue share would increase proportionally. In order to break even on the rent and revenue share, the store would need to generate a monthly revenue of at least ₹3.6 crore ($480,000) after the first three years. This assumes that the store’s other operating expenses, such as salaries, utilities, and inventory costs, are covered by the revenue generated.
While the monthly rent and revenue share may seem high, it’s worth noting that the store is located in a prime location within one of India’s largest malls. Moreover, Apple is banking on the rapidly growing Indian market and the increasing demand for premium products to drive sales and generate profits in the long run.
Apple’s decision to establish a retail presence in India is a strategic move, as the country presents a significant opportunity for the company. With a population of 1.4 billion people and a growing middle class, India’s hunger for technology makes it an attractive market for Apple to tap into.
The deal with Jio World Drive Mall, despite its exclusivity clause, is a smart move for Apple. The company’s dominance in the mall will allow it to establish itself as the premier tech brand in the country. Additionally, the mall’s location and foot traffic make it an ideal platform for Apple to showcase its products and reach out to a wider audience.
In conclusion, Apple’s deal with Jio World Drive Mall is a calculated bet on the rapidly growing Indian market. While the monthly rent and revenue share may seem steep, the store’s prime location and the increasing demand for premium products make it a worthwhile investment. With proper execution and a focus on customer satisfaction, Apple is poised to make a significant impact on the Indian retail market.