Why China is Apple’s Land of Golden Opportunity
Last fall, when I was in Beijing, I noticed that Apple’s iPhones seemed to be just about everywhere I turned. I was on the campus of one of the major universities and an abundance of students there had an iPhone. While Apple’s iPad was still relatively new to the Chinese market, I saw a lot of these also floating around the campus and in the hands of quite a few students.
This week I headed back to China via Hong Kong and got to see the new Apple store that was opened just a week ago. It is 15,000 square feet, two stories and laid out pretty much like any of the other big Apple store in big markets today. In this case, it is right in the heart of Hong Kong’s Central district and connected to the International Finance Centre Mall. If you come over on the Star Ferry from the Kowloon side, it deposits you on the Hong Kong side just about at the foot of Apple’s new store. To say that this store is centrally located would be an understatement.
I am told it is just the first of at least two big Apple stores to be in Hong Kong. The second one will be in Causeway Bay and will open later next year. A week earlier, Apple opened their largest store in Shanghai which can handle 40,000 a day and along with another one in Shanghai near the telecom tower and the ones in Beijing. It is pretty clear that Apple sees China as a very large market opportunity for them.
Apple is taking advantage of the new emerging middle class in China, which over here is known as the consumer class. This is made up mostly of young people who work in factories or are two income families who have moved to these bustling cities and they like to flaunt their new-found wealth. For them brand is key as they are very status conscience. In China, any Apple product fits into that definition of status perhaps even more so than in America. I am told that if you have an iPhone or iPad, you are looked up to and envied.
I spoke with a professor in HK and he told me that nearly every young girl he knows has an iPhone. They make about $300 USD a month but they still have an iPhone. What’s more is that the iPhone in China is not cheap. They start at around $750. To them however them it is a status symbol. For those of us who travel to Asia a lot, especially Japan, we already know how status crazy some Asian youth can be. For example, when Michael Jordan goes to Japan, he is always mobbed and people want his shoes and anything with his brand on it.
But these Asian kids are not only status conscience. They are also gadget freaks who love their tech toys. So they gobble up iPhones, iPads and iPods in very large numbers. There are rumors that Apple will soon be on other carriers in China and that could triple their reach in China over the next two years.
Now, if you don’t believe that Apple has gotten to high value status, think about this. When I was on the Kowloon side of Hong Kong, I found a shop that had paper iPads and paper iPhones for the dead to give during funerals or days honoring ancestors. At first I thought these were just paper displays until the guy in the shop slapped my hand and told me they were sacred.
I also spoke with telecom execs who were at the same meeting I was at and they pointed out that we who follow Apple in the US are too myopic. We see them as just being a US and European focused company instead of what they really are, a world-wide technology force. They pointed out that Apple has their phones with 145 WW carriers today and are adding about 5 carriers a month around the world. And like in China, the iPhone is a hot product and in great demand with those who are starting to move into the middle class of their local economic bracket. To them the iPhone is not only a status symbol but the crème of the crop in smart phones.
Before I left the new Apple store in Hong Kong, I asked a group of young people who were in the store looking at Apple products if they were interested in Apple’s upcoming iPhone 5 announcement. I got a resounding yes and in fact, many of them will be glued to blogging sites covering the iPhone launch even though it will take place in Hong Kong at 1:00 AM.
Of course, there is a lot of competition in smart phones and tablets in Asia, but Apple’s products appear to be the one that this new consumer class really wants to own. While Apple has only 5 stores in China, I am certain that there will be more given the huge appetite for Apple products in this country.
So, if you look at Apple and think that their growth and future is limited, just consider the fact that they are just starting to tap into the China market. Not to mention the fact that these newly minted middle class consumers are becoming a major part of the new Chinese economy.
It seems to me that Apple has perhaps more opportunity to grow this market than any of us can imagine.