China Consumer

Lucky seven

Will Apple’s newest iPhone prove a hit in China?

The new iPhone 7 smartphone is displayed inside an Apple Inc. store in Los Angeles

The new and improved iPhone

Maintaining the buzz around the Apple brand in China was always going to be a challenge. At its peak, enthusiasm for the latest iPhone reached a point where people were selling their kidneys to get their hands on one.

There were signs that the Californian giant still has some cachet among the Chinese this month, however, when at least 400 new iPhone 7s were confiscated at the border with Hong Kong on the first day the phones were made available to the public.

The People’s Daily reported that Shenzhen customs officers caught more than 60 people trying to smuggle Apple’s newest smartphone into the mainland (the device is cheaper in Hong Kong where there is no sales tax).

One group of smugglers was apprehended with 190 phones, which they had strapped around their waists and their ankles.

The Californian brand could do with some headline hype. Sales of its flagship smartphone plunged 32% in the second quarter in China, and its local market share dropped from 11.9% to 7.8%. Competitive alternatives from the likes of Huawei have been capturing customers, thanks to their slick design, functionality such as dual SIM card slots and enhanced battery lives, and lower prices.

So with China slipping from second to third place among Apple’s largest markets, the Californian firm has ground to make up. The tech giant has quietly changed its tactics for generating buzz around its latest iPhone launch, for instance. According to 21CN Business Herald, it invited a wider array of Chinese journalists to the launch event in San Francisco, including fashion writers, and not just the usual tech reporters. It has also made some changes to its distribution strategy. For a start, it has taken back some of the rights from wholesale distributors to get better control over pricing and inventory. Instead of receiving supply from middlemen, most retailers now source directly from Apple.

In addition to the three mobile carriers and the 22 Apple Stores currently selling its smartphones around China, the tech firm is also switching tack by involving more bricks-and-mortar retailers for the release of the iPhone 7.

For instance, the new smartphone can already be found in all the large electronics chains like D.Phone, Suning and Gome. In the past, these chains received inventory some time after the initial release. Similarly, e-commerce platforms like Alibaba’s Tmall and JD.com were allocated ample supply of the iPhone 7 as soon as the handset was released.

“Even though the margin on the iPhone 7 is not any higher than other manufacturers, no e-commerce operator wants to miss out on it. The iPhone is not just a handset, it symbolises innovation and trendiness. And besides, Apple products bring high-end shoppers to the website, a segment every e-commerce site wants to target,” an industry insider told 21CN.

Still, perhaps the biggest fillip for the iPhone 7 may have been news of the battery explosions involving Samsung’s Galaxy Note 7 smartphones. The PR disaster began with incidents in markets where Samsung first launched the device, such as South Korea and the US. But it hasn’t helped that just last Sunday, three more Galaxy Note 7s were reported to have caught fire in China – in spite of their using supposedly safer batteries made by another manufacturer.

Samsung maintains that the incidents in China weren’t related to faulty batteries, but consumers have scrambled for refunds after photos of charred phones went viral. The local media fanned the flames with round-the-clock reporting and the South Korean giant is unlikely to receive much help from the Chinese authorities either. In fact, after news about the explosions, China’s aviation authority issued safety warnings to flyers not to carry the Samsung smartphone on planes.

Perhaps that means that the new iPhone will face a little less competition from Samsung in the high-end smartphone market. But Chinese consumers are getting harder to impress. For that reason National Business Daily offered Apple this note of sympathy: “Even though [netizens complain] that the iPhone 7 is not revolutionary… every new improvement is like Usain Bolt running 0.01 seconds faster. It is a very difficult thing to do.”


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