Apple is having to rethink its Apple Store strategy in China

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Apple West Lake
Apple's gorgeous retail store in the West Lake shopping center in Hangzhou, China.
Photo: Apple

Over the past several years, new Apple Stores have been opening all over China — but the bloom might be off the rose.

According to a new report, Apple’s Chinese retail stores have been struggling with slowing growth. Despite recently opening its 50th store in greater China, Apple is facing challenges on a number of fronts. And they’re causing it to rethink its strategy as a result.

One problem is that a growing number of customers prefer local smartphone brands, which have increasingly come on in leaps and bounds from the low-end iPhone clones they were just a few years ago.

“[A decade ago], Apple was offering a product that was so much better and so different that it made sense for people to show up at the store to buy something,” said Ben Cavender, a senior analyst at Shanghai-based consultancy China Market Research Group. “In 2018, it’s not clear what Apple is selling that’s dramatically different or better than anything else on the market.”

It also appears that, where people do opt to buy Apple devices, many will opt for buying it from places other than official Apple Stores. According to sources, just 10 percent of Apple’s sales in China come through its retail store, while the overwhelming majority — 90 percent — come through third party vendors, e-commerce, or other sources.

Mo’ stores, mo’ problems

Into this comes the additional problem of local problems Apple has to contend with. For instance, some fraudsters try and abuse Apple’s promotions, such as offering Beats headphones as a freebie with other purchases for a back to school deal. The Information notes that:

“One morning, two charter buses pulled up to an Apple store in Beijing carrying about 80 students led by a man holding a flag like a tourist guide, according to a former employee who witnessed the event. One man lined them up outside the store and assigned each student a number. A second handed them a credit card once inside. A third waited outside to collect the laptops and headphones.

The students, recruited from online chat rooms affiliated with nearby universities, were each paid about $10 for their effort, the former employee said. Similar schemes took place at Apple stores across the country each year, the former employees said.”

As a result of these factors and others, Apple is now rethinking its strategy to appeal to people in smaller Chinese cities, rather than trying to cover the country in Apple Stores — as it has done in the U.S.

This has slowed the rate of Apple Store openings in the country. In 2016, Apple opened 17 Apple Stores in China. In 2017 and 2018 combined, it opened just five.

Factor in things like the burgeoning trade war with the U.S., and it’s no wonder that Apple would be feeling skittish!

Source: The Information