Apple's Silent Killer In China

Posted by Kirhat | Tuesday, September 20, 2016 | | 0 comments »

Apple Store in China
The world's biggest market for tech gadgets and its paraphernalia could also be considered the biggest threat to the dominance of Apple products. China is second-largest economy in the world with 1.4 billion people potential clients and the fastest-growing middle class on the globe.

Apple knows this, which is why they have invested heavily in the country as evidenced in the numbers. In the fourth quarter of 2015, Apple revenue soared 99 percent in China; geographically speaking, Greater China was second to only the Americas in revenue - and if it kept growing like that, it would overtake them soon enough.

However. everything would start falling apart. Chinese revenue fell 26 percent in the second quarter and 33 percent in the third. Revenue from the iPhone fell for the first time, and company stock began a steep descent.

One might assume that market saturation, plain and simple, is to blame for Apple's fall from grace in China. Once every Chinese citizen who can afford it has an iPhone in their pocket - poof! - the growth is gone.

But that's not the problem Apple is having in China. Apple's problem is competition; in China, a handful of newcomers have been silently but methodically kicking butt and taking names -- Apple being the biggest butt and most recognizable name.

Oppo, Vivo, Huawei and Xiaomi: These are the competitors that pushed Apple to fifth place in the battle for Chinese market share in the second quarter.

In the second quarter of 2015, Apple held a respectable 11.9 percent of the market, making it the third-leading smartphone brand in China behind Xiaomi (17.1 percent) and Huawei (15.6 percent). One year later, Apple had lost nearly a third of its share and owned just 7.8 percent of the market.

The culprits? Two domestic companies that had less than 8 percent of the market share in 2015: Oppo and Vivo. Growing shipments by 124 percent and 75 percent respectively, the two brands now own nearly 30 percent of the Chinese marketplace. Rewind two years, and their combined market share was about 5 percent.

So how did two no-name smartphone newcomers outdo the most profitable company on earth? With shockingly traditional means, it turns out.

At first, several years ago, the Qualcomm-backed Xiaomi was threatening to "disrupt" Apple and its Asian ambitions: The firm made high-end smartphones that were eerily similar to the iPhone, but sold them online and marketed them through social media - eliminating tons of overhead costs and making high-end smartphones price-accessible to the Chinese middle class.

Strangely enough, Oppo and Vivo's surge has coincided with a return to brick-and-mortar retail, a model that Xiaomi had once successfully shunned as it attempted to dethrone Apple.

In the last two years, Oppo and Vivo have gobbled up share from both Xiaomi and Apple, realizing that old-school marketing campaigns, celebrity endorsements and point-of-sale distribution still works like a charm.

After all, sometimes the best way to take on Goliath is with a slingshot.


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