Image: Lintao Zhang/Getty
Apple products are flying off the shelves across China, where the company’s revenues have grown by 600% in the past two years alone.
Since 2009, the Chinese market’s share in total Apple revenue increased from just 2% to 12%. Much of this growth is fueled by Chinese consumers’ ravenous appetite for iPhones and iPads.
Even before China Unicom (China’s second largest telecommunications provider) won the rights to officially sell the iPhone in 2009, thousands of unlocked iPhones poured into the country from Hong Kong and other overseas markets.
Since then, the iPhone has become the ‘must-have’ smart phone and the ultimate status symbol in the Middle Kingdom. The Chinese Internet teems with outrageous stories of crazed iPhone fans who are willing to go to extremes such as to exchange their virginity or even body organs for the latest version of the iPhone.
If there is so much demand for iPhones in China, then why aren’t consumers asking for an iPhone 4S this Christmas? It’s not that they aren’t impressed with cool new features like Siri. The real reason lies in the phone’s exterior design – there is no significant difference in outward appearance between the iPhone 4 and iPhone 4S. As a result, Chinese consumers have no way to show off that they have the latest iPhone model when they walk down the streets of Beijing, Shanghai and Shenzhen.
If it doesn’t look good, it’s not worth it
Many Chinese don’t care how smart their phones are – it doesn’t matter how many applications or other functions their phone has. Chinese consumers crave the latest versions of iPhones because of the prestige of Apple’s flagship smart phone and their scarcity in the Chinese marketplace (iPhones have always been in short supply in China). Last week at an Apple store in Washington DC, I stood next to a group of Chinese students who each purchased five iPhones with cash.
The sales rep there commented that the same group comes in every day to buy new phones to mail back to China. Prestige and scarcity make people feel that using an iPhone displays a certain social status differentiating them from ‘common’ people. this is a phenomenon the Chinese call mianzi (translated loosely as ‘face’). For many Chinese people, buying an iPhone helps them have more mianzi and thus feel better about themselves.
Unfortunately, since the iPhone 4S does not look different from the iPhone 4, Chinese consumers have no way to demonstrate to those around them that they have the newest and sleekest version of the iPhone.
Chinese ‘superficial consumption’
As mentioned above, many Chinese consumers are more turned on by the social status that comes with owning an iPhone than they are with the iPhone’s actual design and function. Moreover the iPhone is not the only example of this kind of Chinese ‘superficial consumption’. this type of purchasing behavior is most evident in the luxury retail sector.
China surpassed the U.S. to become the world’s second largest luxury market in 2009. on the one hand, it’s unsurprising that many Chinese have entered the wealthy middle class group because of China’s rapid economic development. Interestingly though, the Chinese consumers willing to purchase luxury goods are not just the members of the middle class – many ordinary income or even low-income consumers are willing to set aside significant percentages of their earnings to buy luxury goods like clothes, handbags and high-end electronic devices like iPhones.
You might easily come across a young woman on the streets of Shanghai carrying an LV bag while struggling to squeeze into a packed public bus. Such phenomena can be traced to the psychology of ‘superficial consumption’: purchasing highly reputable luxury products to gain self-satisfaction and more distinguished social status.
China’s immature 3G app market
From the perspective of the market environment, another reason why the iPhone is seen more as a cool phone than a uniquely useful one is the lack of popularity and promotion of 3G applications in China. At this stage, China’s 3G market is still in its infancy. most Chinese understand 3G as a faster way to access mobile Internet, yet many do not understand how to make use of applications like their counterparts in the US.
According to Ligang Xiang, a Chinese telecommunications industry expert with iResearch , about 78% of Chinese iPhone users never install any new apps by themselves after their initial purchase. The reason why is because they don’t even know how to download and install them. Obviously, Chinese consumers now are more interested in the iPhone itself rather than what they can do with it.
Get Creative for the iPhone 5
This time around, Apple disappointed millions in the Chinese market, because it’s clear the iPhone 4S does not meet Chinese consumers’ need for a differentiated product to show off to their family, friends and co-workers.
Most Chinese consumers purchase iPhones more for superficial reasons than functional ones. Much of this can be attributed to the massive influx of the ‘new money’ Chinese wealthy who want to buy their social status and show the world that they ‘made it’. One word of advice to Apple: for the iPhone 5, consider creating a gold-colored phone flashing diamonds on the outside – that will really help image-conscious Chinese consumers differentiate themselves from their friends with last year’s model.
The Simple Reason Chinese Consumers Aren’t Breaking Down Doors To Get A New iPhone This Time
(Credit:Apple)
