Apple’s China Weakness

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Every year, I am asked for the biggest surprise in the Global Brand Simplicity Index findings. In 2013, this was not a hard question: Apple, which had only risen as a simple brand in the past 3 years, had taken a steep dive. The reason behind this dive was itself simple: Chinese consumers saw Apple as significantly less simple in 2013. The drop was so significant, we had to triple check our data to make sure there was no error: -102 spots. We dug deeper, looking at the open-ended questions (which allow respondents to detail their experiences) and spoke with our colleagues in the China offices. Some of the changes in consumer perceptions appeared connected to bad press following a CCTV program that charged Apple with discriminatory customer practices in China. Respondents said they were also unhappy with the incompatibility of Apple products with non-Apple products.

In sharp contrast to current Chinese perceptions, many of the people in the long store lines for the launch of Apple products in the US were thought to be people who were reselling black market Apple devices in China (which has included even having fake Apple stores). Although this scarcity is what made Apple a status brand in China, the illegal selling has probably not helped ensure a consistent, high quality Apple experience and service.

We at Siegel+Gale had already seen Apple losing some of its luster, as the Samsung Galaxy won our Simplicity Battle of the Brands versus the iPhone in early 2013. In contrast, Interbrand named Apple the most valuable brand in 2013, an anointment that seemed counter-intuitive given what our data was showing.

A recent NY Times article highlighted Apple’s brand challenges in China even as it launched its partnership with China Mobile: launch attendance was thin and the article agreed with our findings that the brand’s reputation had significantly suffered in the last year. Today’s earnings call did not incorporate any results from this deal, as it only went into effect this January. However, CFO Peter Oppenheimer did emphasize the importance of China to the brand. “China is an incredibly important market to Apple and iOS devices already account for 57% of all mobile web browsing in China.” Our data shows that Apple needs to make significant improvements to its reputation and experience in order to retain this leading position.

A key is understanding that the Chinese market is different and requires tailored strategies: what works in the US and Europe doesn’t always work in China. The global brands that succeed, like McDonald’s who adapts the menu to fit local tastes or Ikea that has house items for the Chinese New Year, tailor their offerings and experience to China. So, likely the key to a successful China Mobile deal is ensuring Apple rediscovers how to make itself special to Chinese consumers, now that the thrill of the overseas status purchase is gone.

Apple Store, Pudong. Original image here.

Brian Rafferty is the global director of research insights at Siegel+Gale.

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