The Chinese have a love affair with Apple (news, site), as evident with how their Apple Stores in the country are outselling even the most popular Apple Stores in the US. But in a country that's notorious for producing almost-perfect knockoff gadgets and devices, how has Apple managed to appeal to consumers, given its premium pricing?
Apple is reportedly planning to build a new Apple Store in Shanghai just a year after opening its flagship 16,000 sq-ft store in the city. The problem? The store is already getting too crowded. Apple's official retail stores -- two in Beijing and two in Shanghai -- are already the busiest Apple Stores in the world, which also generate the biggest revenue for the company. Last week's Q2 earnings report include US$ 3.8 billion revenue from China, which is a big chunk of the pie.
Is There a Magic Sauce?
Analysts have found interest in how Apple has achieved this feat, given that it's a foreign brand. Aside from Steve Jobs' exuding his usual Reality Distortion Field when it comes to marketing Apple products, analysts credit a few things that contribute to Apple's success in the region:
- Scarcity -- It beats the classic law of supply-and-demand. Apple products are not normal economic "goods" that experience a decline in demand with a higher price. Apple products carry a certain prestige that has made the products desirable even at a premium. John Quelch, former senior associate dean at the Harvard Business School, says "scarcity sells, and this is the same strategy Apple has used in the US."
- A rising middle class -- Increased capitalism in China also comes with an increase in consumerist attitudes. Upper-middle-class Chinese are having increased purchasing power, and many are going for computers, gadgets, devices and other products previously unattainable in this market.
- Lack of conflicts -- For now, Apple has not made a foray into social networking, which is exactly what has brought Google, Twitter and Facebook to disagreement with the Chinese government. The web is a heavily regulated industry in China, and social networks in China are seen as a potential source of trouble.
- Partnerships -- Apple is also said to enjoy a relatively relaxed retail environment, especially because it doesn't compete with any state-owned business. In fact, Apple enjoys a partnership with China Unicom and is eyeing partnerships with other carriers. China is the biggest mobile market in the world, with almost a billion mobile users. That's a lot of potential iPhone users!
Apple Mania Gone Too Far?
The story doesn't end there, though. Given Chinese ingenuity, we're now seeing ripoffs of not just Apple products, but the Apple retail store itself. A handful of "Apple Stores" have opened up in some locations, which use the same design, same staff uniform and layout as the official Apple Stores. But looking closer, you'll find out that these are imitations -- built with lower-standard material, and some even spelled as "Apple Stoer."
Apple has not officially commented on the matter, but it has been confirmed that the fake Apple Stores are selling genuine Apple goods. As of today, the Chinese government has shut down two of the five stores for not having appropriate business licenses.
This drives the point even deeper -- the Chinese are going crazy over Apple products. With this big a market, and with potential partners all around, it won't be a surprise if Apple makes a killing in this region in the foreseeable future without the need to slash prices and produce copycat products. Let's see Android, Windows Phone and BlackBerry do that.