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Apple faces China retail conundrum

posted 4 Jul 2012, 02:58 by Mpelembe   [ updated 4 Jul 2012, 02:59 ]

Apple's sales are on fire in China, but the tech giant may need to rethink its product mix to extend its growth run in the world's most populous market.

CHINA-APPLE RETAIL - Made in China, and sold out in China too. More and more of Apple's rising fortune is tied to the appetite of dedicated Chinese buyers.

The company's latest results show Greater China quarterly revenues have ramped up to an impressive 8 billion dollars - or 20% of the firm's total haul.

And with iPad trademark fight with China's near-bankrupt Proview finally resolved, it may be time for Apple to expand its retail presence.

In a country of 1.3 billion people, Apple has just 5 official stores, split between Shanghai and Beijing. The next two cities it's targeting? According to our sources, Chengdu and Shenzhen.

But don't expect a frenzied pace of expansion.


"The role that the Apple stores play certainly in China isn't really primarily as a sales channel, but really more as part of the overall brand experience. so keeping it a little more exclusive, you know, keeping it really as key destinations that people want to go to, to experience the brand, I think, is actually a good thing. You know... could they have more than 5? Yes, I think 5 maybe isn't enough. Should they have a hundred or two hundred? I say that's probably too many."


"Apple's retail shops in China have historically topped the charts both in terms of sales and in terms of foot traffic. This one here in Hong Kong is its most expensive property on the books. But when it comes to selling iPhones, it's not just about the retail presence, it's also about the carriers."

Apple's iPhone was long relegated to 3rd-place carrier China telecom, until China Unicom joined the party in March.

Apple is still trying to work out a deal with China Mobile, by far the biggest carrier, though its customer base is primarily pre-paid users, many of whom prefer cheaper handsets.

Samsung on the other hand launched its flagship S3 handset on all three carriers simultaneously, and its offers a mix of smartphones all the way from the high-end down to the bargain basement.

And every Android device sold in China means new users buying into the Google ecosystem, which may keep them away from Apple even if they do find the cash to upgrade to a more expensive smartphone later.

Apple may have a plan to stem that tide. A cheaper iPad Mini is rumoured for release this fall, which will tie in nicely with better integrated Chinese internet services in its IOS 6 release.

But eventually Apple will have to decide whether it's reluctance to venture downmarket is worth the risk to future growth in China, a country that's on course to become its biggest money maker.

Jon Gordon in Hong Kong.