Lessons from Apple's Spectacular Rise in China
Full credit to Tim Cook and the team at Apple who sold more smartphones in China than any other brand in the last three months of 2014. It's the first time Apple achieved this, and especially impressive with the new iPhone 6 only launching halfway through the quarter.
Perhaps the most notable feat is that the hugely popular phones are almost twice the price of their nearest competitor - further reinforcing that China's premium market is as alive as ever for those brands who give consumers what they want.
There have been many foreign brands who have risen to remarkable heights in China, only to fall out of favour overnight and struggle to find relevance again with consumers. Apple could have gone that way back in 2012, losing its hero status following a barrage negative state media coverage for being 'arrogant', contributing to a drop from 9% to 5% of market share in six months.
Apple wasted little time in analysing how it could improve in China, and made fundamental changes to the way it operated in the market. One of the company's biggest changes was toeing the Government line, a necessary reality of doing large-scale business in China.
Apple has done a great job at listening to what Chinese consumers want, launching the iPhone 6 and 6 Plus with larger screens to meet market changes. It also made phones that better supported the country's biggest mobile network, China Mobile. Its retail footprint has expanded rapidly to 20 stores in China, and is set to double again in the next 18 months to take advantage of rising wealth in lower-tier cities.
On top of that, Apple has realised how difficult it is to make decisions about China from afar. They have added a China-based executive to the top table, as well as recruiting 200 Apple retail staff from the U.S. to continue to grow their business in China.
Apple will never be able rest on its laurels in China with many cheaper, lower margin and formidable competitors such as Xiaomi, Samsung and Lenovo nipping at its heels, but we have faith it will continue to set the standard by understanding the market, constantly innovating and adapting to China's ever-changing environment.
If you're wanting to better understand and adapt to China's market, contact us to see how we can help. We hope you enjoy this week's Skinny.
Chinese Consumers
Why 2015 Marks a Turning Point for Chinese Brands: Four of the top five most valuable brands in China are Internet and mobile firms according to the BrandZ 2015 ranking. Of the top-100 brands, 47 are market-driven businesses - not state owned, up from 29 a year ago. More on the infograph.
China Amazed as Alibaba Fights Publicly With Regulator: Further reinforcing the increasing clout of market-driven businesses in China, Alibaba publicly challenged a state regulator's report about fakes, based on the small sample size that bore no statistical credibility. Yesterday, Jack Ma announced that the problems with the regulator were resolved "at first stage," and the company will continue to fight fakes with its 2,000 full time employees who help monitor counterfeits.
Super Rich Continue to Cut Back on Gifting: Gifting spend by China's uber rich dropped 5% last year according to Hurun, adding to an overall drop of 30% over the past two years. Apple was the most-favoured gift brand, followed by Louis Vuitton, with 2013's no.1, Hermes, dropping to seventh for 2014. The popularity of giving wine fell by a third.
Internet, Mobiles, Social Media & Ecommerce
Seven Things We Learned from Apple's Earnings Call: Apple blew Wall Street expectations out of the water with its $74.6 billion sales in the last quarter of 2014, on the back of soaring demand in China for its new iPhone 6. Mainland China sales grew 100% from a year ago - particularly impressive given the iPhone 6 launch was delayed more than a month, entering the market halfway through the quarter.
Alibaba Reaches 334 Million Shoppers Who Spent $126 Billion in Q4: Active users on Tmall and Taobao grew 45% from a year ago to 334 million shoppers, spending an average of $378 each in the last 3-months of 2014. Tmall accounted for 37.2% of sales and grew 60% from a year ago - 40% faster than Taobao.
Tencent's WeChat Ads Under Fire: 80% of respondents in a CCTV survey considered WeChat's sponsored ads trial to be commercial harassment. Brands such as Coca-Cola, BMW, Cadillac and Chinese smartphone maker Vivo were included the trial.
Little Emperors
Toy Story: What Toy Sales Tell us About China's Future: China makes 75% of the world's toys. Over the past few years, manufacturers have started targeting Chinese consumers, with sales growth averaging 13% a year between 2008-2013 to just shy of $20 billion. Euromonitor predicts sales will rise by 57% by 2018 - the world's fastest growing market, with affordable and aspirational products like Lego selling particularly well.
Chinese Ecommerce Site for Babies Raises $100M Funding: Ecommerce site Beibei sells products for infants, toddlers and mums including clothing, accessories, toys, and diapers. 100,000 items are sold daily, with 70% bought on mobile devices. The site launched in just April 2014 and is now valued at $1 billion.
Food & Beverage
JD.com Taps International Suppliers for Broad Imported Food Initiative: Jingdong is following Tmall's lead with promotions to drive online sales of imported food. The platform's first promotion focuses on American food, with Canada, France, Australia, New Zealand and Chile to follow. Japanese rice has become one of the fastest growing imported foods, with sales more than tripling last year amid safety fears with locally grown rice.
Bird Flu Season Becoming a Serious Concern for Chinese Authorities: Government officials taking measures to restrict the live poultry trade, such as closing markets, to reduce the risk of bird flu over the particularly notorious winter period.
Chinese Tourists
Chinese Tourist Spending Hit Record Last Year Amid Income Gains: Chinese tourists spent a record $164.8 billion overseas in 2014 - 28% more than 2013. 109 million travelled abroad, helped by disposable incomes rising 10.1%.
Health
Wearable Devices Have Bright Future in China: An international survey into wearable health devices by Accenture found that 65% of Chinese consumers have an interest in buying one by 2020, versus 39% globally.
Luxury
The Japanese Buy Luxury To Fit In, But The Chinese Buy It To Stand Out: China is the only male-driven luxury goods market, whereas Japanese consumption has been essentially female driven. Beyond that, there are many more consumer profiles in China and differences in culture, history and sociology which are likely to continue to drive strong growth in China's luxury market for some time.
Auto
Car Ownership in China Tops 154 Million in 2014: Cars have replaced motorcycles as the main method of private transportation, accounting for 58.6% of motor vehicles in China. Five years ago, cars made up 43.9% of vehicles. 12% of licensed drivers have less than a year of experience. 35 cities have more than a million cars, with Beijing having the highest rate of private car ownership at 63 per 100 households, versus an average of 25 for China.
That's the Skinny for the week!See previous newsletters here. Contact China Skinny for marketing, research and digital advice and implementation.
