A Blog by Jonathan Low


Mar 18, 2015

For Apple, the Chinese Consumer Is Redefining the Future

It's a matter of perspective. If you don't like your market share, you can redefine your market. But if you are fortunate, your customers will do that for you.

And Apple is fortunate.

European and American customers tend to think of Apple as a purveyor of consumer electronics. High end, to be sure. But a functional product first and foremost.

For Chinese consumers, as the following article explains, it is a status symbol and a personal statement as much as a device. Westerners tend to think of Apple products as pricey compared to the alternative. Chinese regard them as a sensible and appropriate investment in their future.

On which of those two customer bases would you be more inclined to focus your attention, effort and energy? JL

Om Malik reports:

The year-over-year growth in its two major markets – Americas and Europe is starting to moderate, but China is going strong and picking up steam.
I finally had a chance to catch up on Apple’s latest keynote, which saw CEO Tim Cook announce some additional details about Apple Watch and of course, its pricing. The company also announced a new kind of Macbook — pretty amazing actually — and some other newish offerings such as HBO Now on Apple TV. As I sat and watched through the keynote video, one thing which became pretty obvious — Apple’s number one focus going forward is China.
For me nothing reflected the importance of China more than the fact that the keynote opened with the date and time in Chinese language characters and the first few minutes being devoted to Chinese retail operations. It shouldn’t have surprised anyone: last year, Cook told Sina, a Chinese news organization that it plans to open 25 new stores in greater china over two years, in addition to 15 it already had in operation. In the last six weeks Apple has opened six stores in China. Cook has visited China about half a dozen times. And he should — for China is making shiploads of money for Apple. 
Maybe, it’s just me who finds it a little ironic that the country which actually assembles the iPhone is now the second largest market for the iPhone after the US. It might actually be on its way to become the largest — a UBS research estimate put China’s share of iPhone sales at about 36 percent of the total.
Apple’s revenues went up from $12.7 billion in 2011 to $29.8 billion in 2014.  At Goldman Sachs conference, Cook is rumored to have said that he has been studying China for 30 years and that “I think we’re still not too far from the surface” in opportunity terms. That should be good news for the company since the year-over-year growth in its two major markets – Americas and Europe (where the revenues are already large) is starting to moderate, but China is going strong and picking up steam. Analysts estimate it is only a matter of time before China becomes bigger than Europe.
China, also might be behind Apple’s products having taken a golden hue. I wonder if Steve Jobs would have approved of the gold laptops and iPhones, but one can’t argue with the logic. When iPhone 5S came out in gold, it quickly was in short supply, especially in China and other Asian countries. I suspect that the new gold Macbook is going to have a similar impact. I point this out, merely because there is a love affair between the Chinese and gold jewelry. The gold consumption in that country is going through the roof. (In 2014, the worldwide consumption of gold fell and yet, China demand still stayed strong.)
Talking about gold, some believe that the Apple Watch Edition (the expensive kind) will find more takers in China than anywhere else in the world. It makes sense — considering average American doesn’t much care for the watch, and even when they do, they at a moderate price point. Time magazine writer puts it best:
While Americans will compare the Apple Watch’s $349-$17,000 price tag to the cost of consumer electronics, Chinese consumers are more likely to stack it up against luxury timepieces. The worldwide median price of a luxury watch is about $10,700, according to DLG. That means the Apple Watch Sport (starting $349) and Apple Watch (starting $549) are inexpensive by comparison, while the gold and silver Apple Watch Edition models that start at $10,000 aren’t crazy purchases.
Fair point! Vogue China editor-in-chief said: “We embrace new technology and digital products more easily than perhaps people elsewhere.” And if they (i.e., the Chinese consumers) embrace the Apple Watch, then many of these articles that are hating on the Apple Watch wouldn’t really matter.


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