Apple's new channel to compete for China's market is expected to turn red. The Apple industry chain is experiencing a shake-up.
Early in the morning of Beijing time yesterday, Apple released a new generation of three iPhones, which caused excitement among fans. Many home appliance manufacturers in the Chinese market also launched pre-sale services on the same day.
At the same time, the entire smartphone industry is eagerly anticipating the emergence of a new iPhone. Apple’s past innovations have led to widespread adoption of new technologies, which in turn have driven changes in the mobile phone supply chain. This time, confirmed changes include the adoption of OLED full-screen displays and the introduction of Face ID unlocking technology. However, whether these changes will significantly impact the supply chain remains to be seen.
In an interview with the 21st Century Business Herald, Wang Hao, president of Frost & Sullivan Greater China, believes that the new iPhone will return to a double-sided glass body, eliminate the full-screen home button, and introduce major technological breakthroughs such as wireless charging. These features are expected to stimulate consumer demand. However, he argues that while Apple may achieve temporary success, it is unlikely to reverse the long-term trend of Chinese consumers favoring local brands.
The new iPhone quickly became a hot topic online. On the morning of September 13, Apple unveiled three new models: the iPhone 8, iPhone 8 Plus, and the highly anticipated iPhone X. With a price of nearly ten thousand yuan, the iPhone X immediately topped search lists on Baidu, Weibo, and other platforms. Its face recognition feature, which allows users to unlock the device with a glance, has sparked both admiration and mockery from netizens. Still, the enthusiasm of "fruit powder" (Apple fans) remains strong.
The 21st Century Business Herald’s WeChat public account conducted a survey titled “Which iPhone Will You Choose?†According to the results, 32% of readers chose the iPhone X. Given that the 256GB version of the iPhone X costs 9,688 yuan, it has created opportunities for e-commerce installment payment services.
As one of the most popular "IPs," Apple’s new product has triggered fierce competition for distribution channels and marketing strategies. Tmall, JD.com, and other platforms introduced installment payments, cash vouchers, and trade-in programs. Some resellers even drove up prices beyond 20,000 yuan through aggressive marketing tactics. This new product launch coincides with Apple’s 10th anniversary, and with significant design and performance upgrades, the domestic market may see a new wave of replacements.
Wang Hao also pointed out that while Apple has made some hardware improvements, its innovation is still lacking compared to competitors like Xiaomi, Samsung, vivo, and Nubian, who have already announced full-screen phones. In terms of facial recognition, Samsung introduced similar technology earlier this year.
On the morning of September 12, Staged Music Store was the first to announce that it would sell the new iPhones online, offering 36 installments of service. Soon after, Lynx Mall also announced that it had secured the official release of the new iPhone on Tmall. JD.com used the new machine to promote its white bar business.
By 6 p.m., six hours before the Apple event, Tmall and JD.com were competing fiercely, sending press releases to the media and emphasizing their positions. Traditional sales channels, however, remained relatively quiet.
Zhou Tianmu, director of the Staged Music e-commerce department, told the 21st Century Business Herald that Apple's appeal to young people is strong. While the ratio of Apple to Android phones in general e-commerce is 1:9, in Staged Music, it is close to 5:5. This data highlights a unique trend, showing strong demand for phased purchases of iPhones. By the time of the iPhone 8, this demand reached a small peak.
Through data, we can also see the high enthusiasm for purchasing iPhones in installments. In Staged Music Mall, iPhones occupy more than half of the top 10 mobile phone sales. While Apple's overall market share in China is 9.6%, in Staged Music, it accounts for over 50% of shipments.
Currently, e-commerce has become a key online channel for Apple. The official Apple store on Tmall, along with Staged Music Mall, which holds official dealer status, has helped boost iPhone sales. Tmall and JD.com have introduced installment plans and interest-free options, further driving demand.
Zhang Junqiang, a senior operator at Tmall Mobile, admitted in an interview that Apple views e-commerce as a useful supplement to its traditional sales channels. He noted that Apple is expanding into third- and fourth-tier cities, where purchasing power is growing. Apple users are getting younger, with active users aged 28–29, and an increasing number of young female users.
Apple has three direct supply channels: its official website, the Tmall flagship store, and direct retail outlets. These channels offer the best pricing and availability. Additionally, Apple supplies some products to over a dozen authorized distributors in China, including China Mobile, China Unicom, and telecom companies, which then distribute to Suning, Gome, JD, and others.
Compared to traditional channels, e-commerce platforms are much more vocal. Platforms like Tmall, JD, and Suning have clear entrances for mobile phone sales. Alibaba's second-quarter financial report showed that Tmall's digital mobile phone sales grew by 50% year-on-year, becoming the main hub for online mobile phone operations.
For e-commerce platforms, traffic equals business, and the iPhone's popularity continues to attract users. However, the frenzy seen during the launches of the iPhone 4s and 5 is no longer present. Since 2015, iPhone sales have slowed down. Although iPhone sales this year have surpassed those of 2015, the growth rate is lower than previous years, indicating a shift toward more rational consumer spending.
Apple’s Q3 2017 revenue was $45.408 billion, up 7% from the previous year. Net profit rose to $8.717 billion, a 12% increase. However, the performance in Greater China continued to decline, with revenue dropping 25% to $8.004 billion. This marks Apple's sixth consecutive quarter of declining sales in the region, down from $16.8 billion two years ago.
To address this, Apple appointed its first Greater China Managing Director, reporting directly to Tim Cook. This shows Apple's increased focus on the Chinese market. Additionally, Apple has deepened its partnerships with local Chinese internet companies, including Tencent for security cooperation and Alipay and WeChat for payment integration.
In the past, buying apps on the App Store required a cumbersome process of linking bank cards, but now Apple has expanded payment options. In April, Apple faced backlash over a 30% WeChat reward policy, which it eventually canceled. It then launched a five-fold Apple Pay promotion.
Wang Hao believes that Apple’s efforts in the Chinese market reflect its renewed emphasis. For years, the iPhone was seen as the “cheapest luxury†in China. However, with the rise of domestic brands and increased national income, the iPhone has gradually lost its status as a luxury item. Apple has adjusted its strategy, introducing the lower-priced iPhone SE and high-capacity iPhone Plus to target different segments.
In the long run, consumers are becoming more rational and less likely to spend blindly on brand hype.
Right now, supply shortages remain a challenge for Apple. According to CNBC, the iPhone X will ship in November, which some investors believe could delay sales and affect quarterly performance. In the competitive Chinese market, only actual sales will prove whether the iPhone truly resonates with consumers.
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