Apple misses China target

09 July 2012

BEIJING: Apple, the electronics giant, has missed its own retail expansion targets in China, meaning the company operates fewer stores in the country than in many individual American states.

At present, Apple has two stores in Beijing, three in Shanghai and one in Hong Kong. By way of comparison, it has eight store in Pennsylvania, which houses 12.7m people, versus the 1.3bn living in China.

"There are complications around opening stores in China that you don't get in Western countries," Andrew Milroy, vice president of information and communications technology research at Frost & Sullivan, the research firm, told the New York Times.

In 2010, Apple set the objective of running 25 branches in China by 2012. Its existing outlets in the country also have some of the highest traffic and sales levels globally, it revealed last year.

"There's certainly more demand than Apple can serve with their store footprint currently," Torsten Stocker, a partner at Monitor Group, the strategic consultancy, argued.

Tim Cook, Apple's CEO, said in April that the iPhone had 11,000 licensed points of sale in China, "a much smaller number" than the US, even though China constitutes "a bigger opportunity". Such figures fell to 2,500 for the iPad and 1,800 for the Mac. "There's a lot of headroom here in our view," Cook admitted.

David Wolf, chief executive of Wolf Group Asia, the consultancy, suggested that unlicensed resellers have been able to exploit Apple's slow progress, which could potentially undermine its brand.

By failing to move more rapidly, Wolf added, the US multinational "loses not only near-term sales, it also endangers the sustainability of its success in China."

The firm posted revenues of $7.9bn in China during its most recent reporting quarter, trebling totals from the corresponding period in 2011.

Its sales for the last six months have reached $12.4bn, less than $1bn behind those secured across the previous 12 months as a whole.

Last week, Apple was ordered by the Chinese authorities to pay $60m to use the iPad trademark in China, having entered into a dispute with Proview Technology over ownership of the name carried by its tablet.

"Apple paid $60m to learn a valuable lesson. It will also prove handy for other multinationals to understand the different commercial practices and judicial systems prevalent in China," said You Yunting, a partner at the DeBund, a legal firm based in Shanghai.

Data sourced from New York Times; additional content by Warc staff