Ultimi Barbarorum takes a favorable look at Apple’s store openings in China. Read on to learn why. – Ilene
What is Apple up to in China?
Courtesy of Ultimi Barbarorum
Baruch, in this post: A new piece of information, augmented by local insight, that amounts to yet another upside case for Apple. And yes, it involves the iPad.
The new information: This past Thursday, Apple revealed plans to open 25 retail stores in China. Currently, there is one swish Apple Store in an upmarket outdoor Beijing mall, with one more planned in Beijing and two in Shanghai this year. Opening Apple stores in Chinese cities that most foreigners have never heard of (The likes of Shenzhen, Hangzhou, Chongqing, Chengdu, Kunming —there are 25 such cities in China bigger than Chicago) betrays a whole new level of ambition in the Chinese market, beyond just servicing creative elites in their international watering holes.
But what could Apple possibly sell in those stores that the Chinese can afford en masse? Let’s put that question aside for a moment and look at these recent observations:
- My Chinese teacher, upon visiting my apartment, ogles my 17-inch MacBook Pro and 24-inch Apple screen. She goes so far as to run her fingers over the logo. “Made in China!” she beams. There is pride in the fact that Apple devices are made here, even if the IP comes from elsewhere. They are obviously built very well, which is more than you can currently say about Chinese-assembled cars or buildings. Apple computers may well be the most famous high-quality product coming out of China right now, and the Chinese know it.
- Take a subway in China during rush hour and you will see few Chinese reading books or newspapers — the subway is far too crowded to claim that much personal space. Instead, more than half are pressed against their multimedia devices — hacked Sony PSPs, shanzhai touch-screen gadgets, or large-screen mobile phones — often scrolling attentively through long texts or watching soaps.
- Luxury good brands usually tackle China by setting up shop in the most prestigious mall available and then running an ad campaign. These high-end malls are always empty when I inspect them, because very few Chinese right now can afford what’s on offer — but that’s OK: The idea is to stake one’s claim early as an aspirational destination, to be that symbol of success craved by the Chinese, so that when they do all eventually achieve success in droves, they will be preprogrammed to want that Mont Blanc pen in their Gucci bag slung over a Prada one-piece — just as we in the West have long been conditioned to want.
- Luxury goods are easy to fake. Premium goods are not. As the world’s best fakers, the Chinese are well-positioned to appreciate that difference. Truly premium products (Audi, Nikon, Apple) are difficult to fake because their value lies in their superior functionality. Luxury goods are easy to fake because their prime function — to tell time, or to carry your makeup — costs very little. The rest is about conventional status messaging, wrought through expensive materials and labor, scarcity and branding — and these can easily be subverted to produce knock-offs. I suspect luxury brands will find they have a far harder time gaining a foothold in China than premium brands, because the Chinese are uncommonly pragmatic.
- The Apple store in Beijing, on every occasion I have visited, is just as bustling as the ones in New York or London. I haven’t seen many computers being walked out the front door, but there is definitely a lot of experimenting with the display units, and the most popular items are iPod and iPhone accoutrements. (I have already explained why low official iPhone sales in China are nothing to worry about.) In short, the Beijing Apple Store is nothing like a luxury goods store in China. The focus is on transactions in the here and now.
Perhaps it is time to come to the gist of this post. For all the reasons above, I don’t think Apple’s move into 25 Chinese cities is the conventional luxury brand play for China, but a plan to sell them something that they can use, crave and afford today: Yes, iPads. at 499 USD, they are far cheaper than iPhones, which maybe 3 million Chinese have already bought without a subsidy. (I bought a Hong Kong factory-unlocked 16GB iPhone 3GS for 730 USD in Shanghai a few weeks ago.)
But why would the iPad be a success in China? Well,
- Premium UI, multi-touch, battery tech = Hard to knock off.
- Made in China = National pride.
- 499 USD = Affordable to a middle class that is still a minority but huge in absolute numbers.
- Long, crowded commutes = A compelling real-use case and an opportunity to show off.
- iPhone OS = Best-in-class Chinese language support right out of the box. Far superior to any home-grown device — seriously.
- iTunes = All those pirated mp3s and movies will work just fine on the iPad. (Don’t expect the Chinese to pay real money for their music or movies — ever. Sorry.)
- App store = It’s just a matter of time before a third-party Chinese-language ebook app sells cheap literature.
The iPad is the first Apple computer many Chinese can afford. They will flock to it. You might even want to ask “why just 25 stores?” Apple COO Tim Cook has an answer:
“We are very, very focused on the quality of the point of sale and consumer experience,” Cook said. “We would prefer to move slow because we are building the brand for the long-term.”
Expect great things from Apple in China. Expect them sooner than you might think.
