Photo Source: Apple
Last Saturday, Apple opened their first store in Macau. While this is a big step in its own right, it was part of a greater milestone as this marked the opening of the US tech firm’s 41st store in greater China; beating a target set by CEO, Tim Cook in October 2014 when he announced plans to open 25 new stores in greater China over a two year period. The store count at the time of that announcement was 15.
Apple opened their first store in China at Beijing’s Sanlitun District in 2008. It has taken eight years to get to 40 stores, a feat that most brands achieve in half that time. So why has it taken Apple, the worlds largest Company by Market Cap and one of the world’s best retailers to hit this milestone? In this latest article, we explore the reasons for this slow expansion.
Brand is everything and Apple are very conscious of this. It is front and foremost in all the decisions they take relating to their influence in the retail landscape. It is apparent through the product design, store design, and marketing that Apple takes enormous pride in the Brand ethos that they have built and nurtured over the last 40 years. They are not going to take any risks which could impact their Brand.
While there are countless shopping malls across China with a growing number developed by experienced landlords, Apple appreciate that picking the wrong location could have implications for their Brand. They have rightly adopted a cautious strategy ensuring that they only open stores in key locations which will help build brand awareness and continue the growth of the business.
Despite there being a plethora of shopping malls across China, many of them are poorly designed, poorly managed and do not meet Apple’s strict criteria. Apple are well aware of the implications that a poorly performing mall can have on their brand. Instead of compromising, they always decided to wait until they can secure a Grade A location.
It should be noted however that while Apple are dictating the speed of their expansion, some landlords are starting to show wariness to accommodating Apple within their projects. While they appreciate that Apple’s brand is a big draw, Apple have a tendency to want to change the design of the shopping centre as well as vet the surrounding brands and dictate the marketing. While these changes can be advantageous to Apple, they can have negative implications on the remainder of the mall as they often impact the overall circulation.
Although there is an excitement with all the store openings partly due to the experiential environment which few other brands have managed to achieve in China, Apple remain conscious that there are only so many ‘Brand Temples’ that they can open before the consumer gets bored. A lesson which a number of the luxury brands are starting to experience. Apple appear to have found a balance by not committing to all the opportunities that they are being presented, however good the terms may be.
While the flagship stores will generate sales, they serve another purpose. Their main purpose is to introduce the Apple Brand and product offerings to the target consumer and allow them to become familiar and accustomed to the Brand’s eco-system. In addition to the growing number of Corporate-Owned stores, Apple have a network of authorised dealers across China which will generate the majority of their sales within the country.
A number of brands, especially those starting out in China, are always surprised by how difficult it is to secure quality staff. They believe that since China has a population of over 1.34 billion people, there will be an abundance of skilled staff. Unfortunately, that is not the case. Staff are an extension of the Brand and they need to reflect this. It is rumoured that Apple employ approximately 500 staff members for each store so trained staff are in high demand. They are only go to commit to opening new stores if they are confident that they are going to be able to find enough suitable staff to work there.
To summarise, Apple are one of the few brands in China who have not caught up in the buzz. While China is their second largest market behind the US, they continue to expand at their own speed. The Brand remains at the forefront of all decisions and they remain risk adverse, refraining from making any moves that could jeopardise their position in the market. A lesson many brands could learn from.