HONG KONG—Apple Inc.'s two newest retail stores in the Greater China region—a long-awaited Hong Kong outlet and a third Shanghai store, the region's biggest—are drawing much fanfare even as the company has shifted to a more measured expansion strategy.
Click Image To Enlarge
The Cupertino, Calif.-based consumer-electronics maker is opening larger stores at a slower pace in China, where demand for its iPhone 4 has outstripped supply in local Apple stores. Analysts say the company's distribution network in Greater China—which includes just six stores in the region so far, despite originally planning to open 25 stores by the end of the year—still lags behind competitors, but the company is in the midst of an aggressive expansion.
Click Image To Interactive Chart of Apple Store openings planned throghout Asia
Analysts say the slow pace at which Apple is opening its trademark full-service Apple Stores in China is partly to blame for the rise of copycat stores in the region. Earlier this year, the company found fake retail outlets that purported to be official Apple stores in the city of Kunming in southwestern China.
Apple relies on a network of resellers as well as its mobile operator partner, China Unicom (Hong Kong) Ltd., to distribute products throughout China. But the pace of Apple's retail expansion in the region still lags behind the likes of Lenovo Group Ltd., Hewlett Packard Co. and Acer Inc. which have wide-reaching distribution networks in the country.
Torsten Stocker, a China-based partner at consulting firm Monitor Group said.
"They've been quite slow. It has given rise to copycat stores as others jump to fill the gap because the demand for the products is there."
An official at Apple declined to comment.
In the fiscal third quarter that ended June 25, the company sold $3.8 billion worth of products in the Greater China region, which includes Hong Kong, mainland China and Taiwan, representing a more than six-fold increase from a year earlier. Chief Executive Tim Cook said Apple is merely "scratching the surface" when it comes to reaching its potential in the Chinese market.
The Hong Kong flagship store—which has been the center of rumors among online Apple forums for months and opens officially Saturday—will span 16,000 square feet over two floors in IFC Mall in the city's Central district and requires a staff of 300.
This video shows the goings-on inside the new Apple Store in Hong Kong on opening day Saturday, September 24, 2011. Same happy smiling Apple Geniuses with their blue T's:
The mall's management had to terminate, move or not renew the leases of nine stores and knock down several walls to accommodate Apple. Renovations for the new store started in March in the shopping center that averages 200,000 visitors a day, the mall's management said.
The new Shanghai store is Apple's largest in mainland China. It occupies four floors and has more than 300 staff providing service to customers.
New stores alone won't expand Apple's relatively small market share in China, said Sandy Shen, research director at technology consulting firm Gartner. According to Gartner, Apple's market share is relatively small at just 13% of the smartphone market in China and only 2% of the overall mobile phone market, trailing Nokia Corp. and Samsung Electronics Co., the world's two biggest makers of handsets.
Mr. Shen said.
"These stores are more important from the marketing perspective than sales. It will help Apple increase brand awareness and consumer mind share, which will then drive demand for its products."
Mr. Shen said about the new six stores in China:
"They are just a drop in the ocean in China, considering most brands have tens of thousands of stores."
Resellers in Hong Kong say that the new Apple store will only boost their business because they expect the official Apple outlet to be a powerful marketing tool for the brand.
Dennis Ng, marketing manager at DG Lifestyle, which has a chain of stores in Singapore, Hong Kong and Macau dedicated to selling Apple products said.
"It's not a bad thing for us. At first, it'll be competing. We'll see a bit of difference [in our sales]. But after the customers try an Apple store, they'll look to us for convenience. Hopefully, [Apple] won't have enough stock in their stores, so they'll come back to us."
Experts say that the store in Hong Kong is especially important to Apple's overall China strategy given that the city is a magnet for shoppers from mainland China who flock to the former British colony to buy consumer goods at lower prices. Unlike mainland China, Hong Kong doesn't charge sales tax and import duties on goods. An iPad 2, for example, costs 16% more on Apple's Chinese online store than it does on the company's Hong Kong site.
Moreover, many Apple products are launched in Hong Kong before they are put on the market in mainland China. The original iPad, for example, was available in Hong Kong for 56 days before its official launch in the rest of China.
Gabriel Chan, retail analyst at Credit Suisse said.
"Hong Kong is very important for Apple. The mainland Chinese have the idea that things sold in Hong Kong are of higher quality, and trendier and fashionable. For a brand, if you have a shop here in Hong Kong, it's good advertising."
COMMENTARY: Personally, I give a damn about the new Apple Stores opening China for one key reason: I hate forced gaety flung upon me by smiling Apple Geniuses wearing blue T-shirts greeting me as I enter an Apple Store whether its new or used. Just too much forced happiness and phoniness if you ask me.
I ask myself: Why should I be forced to smile and jump up and down with hilarious glee at the sight of an Apple iPhone, iPod or iPad. Some people were simply not genetically designed for that degree of spontaneous happiness over --- shopping. It's bad for my health.
Here's a example of that Apple gaety carried out to the max by the "Crazy Dancing Chick" who apparently has a history of similar "performces" at several Apple Stores. Look at that smile, isn't that a kick, or what.
In a blog post dated August 28, 2011, I introduced you to some of the inside secrets of the Apple Stores which I think you will find very interesting.
Courtesy of an article dated September 23, 2011 appearing in The Wall Street Journal's Asia Business, an article dated July 14, 2011 appearing in WayFaring and an article dated September 22, 2011 appearing in MacRumors
The stores prioritized accommodating those Apple stores since it is likely that all would click in the market. China has a population of more than 1.3 billion. Apple chose a huge market with good potential.
Posted by: Kristopher Gawron | 12/07/2011 at 05:29 AM