Apple Makes it Big in China

Apple Inc. must be tickled pink after throngs of people storm their way into the Apple Store in Shanghai, China. And this is happening not only in one store but in all of Apple Stores in China.

Apple’s two outlets in Beijing and another two in Shanghai are now the four most visited Apple Stores worldwide. Its revenue is much higher and more than what its Manhattan store in Fifth Avenue is earning.

China is considered to be the second-largest consumer of apps for smartphones and tablets second to the United States (US) and Apple is reaping benefits for its entry into the Chinese market. Apple reported enormous sales and profits last week for its third quarter performance and it included US$3.8 billion revenue in greater China, which includes Hong Kong and Taiwan. Overall, Apple’s first three quarters for this fiscal year generated revenue of US$8.8 billion in greater China.

What Apple has done in the Chinese market is a remarkable feat that few global brands can’t seem to repeat. Social networking sites like Google and Facebook are having a tough time grabbing the number one spot in the Chinese market. This is because sites like Google and Facebook pose a threat to China’s Communist Party censors. The Chinese government has blocked Facebook and Twitter and has recently given Google a hard time after Google said they have suspected the Chinese government of hacking activities. Even Google+ is also blocked.

Apple’s business model is also serving it well in the Chinese market. Like what it did in the US, it made sure that its products are as scarce as possible leading to a bigger demand. Together with scarcity, it is also capitalizing on China’s growing upper middle class who are willing to spend and pay a premium for successful brand products.

However, it is also for these reasons – scarcity and growing Chinese middle class – that rip-offs of Apple products – even to the point of pirating the Apple Store – are happening in some parts of China. In Kunming, there is a store pirated not only Apple products such as iPods and iPads but the entire Apple Store.

Chinese regulators had begun inspecting the stores in Kunming and had said they will ensure that laws are complied with.

Another interesting strategy that Apple uses is its operation in the Chinese retail market in which restrictions have been eased. This way Apple is not competing directly against state-owned companies and is even eager to partner with state-run telecom companies.