Apple in China: Retailing the Mac Daddy

Posted on April 22, 2008
Filed Under China Business, China Distribution |

Apple’s (AAPL) first store-in-store in mainland China has been unveiled at the Best Buy store in Shanghai’s Xuhui area.

By opening this store-in-store for Apple, Best Buy is intending to consolidate its position in the middle and high-end market of China and adopt a different operation pattern from Chinese domestic electronic appliance retailers. Best Buy recently shuttered its procurement office in Beijing and is facing fierce market competition from stalwart rivals Gome, Suning, and Yongle.

Zeng Yaozu, marketing director of Best Buy, said that Best Buy Xuhui Store is the retail dealer that sold the most Apple products in China in 2007, and that’s why Apple has decided to upgrade the cooperation with Best Buy and open this store-in-store.

The new store is known to be the only Apple Store-in-Store in mainland China. Occupying a total area of about 50 square meters, it displays more than 60 kinds of Apple computers and Apple brand accessories. Apple will send two technical consultants to the store to provide sales support for it.

Apple is also planning to soon open its own stores in China in Beijing. It has said that one store will be located in the city’s Sanlitun area and the other will be in the Qianmen area.

There are a number of authorized Apple dealers and service firms in tier one Chinese cities (at least), so it’s not as if this is a China entry strategy. Rather it’s a broadening of their distribution chain. Pacific Epoch passes along a rumor about another big box electronics store selling Apple products:

Apple (Nasdaq: AAPL) is expected to announce two directly operated Beijing retail stores along with its list of new Asia store openings at the Apple Worldwide Developers Conference (WWDC), reports CCW.com.cn. According to an unnamed insider, Apple has already completed training for its first group of employees, and is hiring senior sales employees to sell Apple products in Gome (0493.HK) stores. WWDC will be held in San Francisco from June 9 to 13.

Apple China deleted a list of authorized distributor introductions from the purchasing information channel of its website and replaced it with a phone service hotline on April 20, reports CCW.com.cn. According to the report, Apple has outsourced the call service to Shanghai-based telephone software provider Vision-X. Information on Apple China distributors is still available on the site through search options.

Like a lot of consumers all across the world, Chinese buyers with the disposable income and an appreciation for Apple’s design savvy plunk for a Mac in lieu of a Windows machine. Based on a lot personal experience loafing around cafes in Shanghai, I can attest to the popularity of Apple’s Macbook laptop amongst Shanghai’s leisure class.

Despite all that, and despite the popularity of the iPod and the vast numbers of gray-market iPhones, Apple will remain a niche vendor in China. The growth in laptop sales is at the cheaper (and opposite) end of the market where Apple is establishing itself.

That being the case, it makes a lot of sense to sell through the big box retailers. They attract a less price-conscious consumer willing to pay a premium for Apple computers. This may even help shrink the substantial markup that independent retailers now charge for Apple computers in China.