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Luxury in China

The good news for Apple is Chinese consumers are still willing to spend on iPhones with a difference

After poor initial sales in the country of its iPhone 8 series, Apple could see its fortunes turn around with the iPhone X, whose radical design changes may bring back the brand’s cachet

PUBLISHED : Sunday, 01 October, 2017, 5:10pm
UPDATED : Wednesday, 04 October, 2017, 12:02pm

Apple’s new iPhone X upscale phone may be able to offset sluggish sales in China of the iPhone 8 series thanks to the willingness of many Chinese consumers to pay a bit more for items with touch of luxury and originality.

Although growth in the Chinese economy has been slowing and luxury consumption cooling, demand for expensive handsets has never vanished as many people still buy them to highlight their social status. Apple has long been regarded as a high-end brand in the country, and although Chinese makers offer upscale design and performance at reasonable prices, the cachet of the Apple brand can still draw buyers.

“I do believe there are people who will be willing to pay for the iPhone X in China. Especially in certain industries like banking and consulting, consumers will want to purchase a high-end phone to maintain a certain image, perhaps that of a higher status,” said Tay Xiaohan, senior market analyst at technology research firm IDC.

“Also, consumers want phones that look significantly different from previous iterations so that everyone will know that they are using the latest model, especially in China. This is a reason perhaps why uptake for the previous versions of the iPhone has not been high,” Tay said.

Apple suffered a setback after the launch of its iPhone 8 series in China, with some retailers cutting prices just a week after the phones hit the market, due to sluggish sales.

Although the 8,388 yuan (US$1,260) starting price in China of the iPhone X is 42 per cent higher than the 5,888 yuan of the iPhone 8, many Chinese consumers have said in online posts that the iPhone 8 looks so similar to the previous iPhone 7 series that they would rather wait and spend more for the X, the first full-screen handset without a home button that Apple has made.

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Nana Wang, a 27-year-old nurse in Shenzhen, is one such buyer.

She is happy to wait one more month for the iPhone X to replace her broken iPhone 6 even though the cheaper iPhone 8 is already available.

“The iPhone X is all I want at the moment. The design is so unique and I want to be among the first people to own such a handset,” Wang said. But she was concerned about whether she would be able to get one quickly as many of her friends are also waiting.

It is not only Apple of course that sees a market among people like Wang. Some Chinese brands have also tried to offer highly priced products with limited supplies to tap into high-spending groups in society.

In November, 2016, Huawei teamed up Porsche Design to launch a limited edition model of its Mate 9 smartphone with a price tag starting from 9,888 yuan, almost double the coast of a standard Mate 9 model. This week, Porsche Design unveiled its first-ever laptop in China, priced at 18,888 yuan – one of the most expensive laptops ever sold in the country.

A McKinsey report earlier this year estimated that there are 7.6 million Chinese households who spend more than 71,000 yuan on average every year on luxury goods. But it noted that the market is maturing and brand loyalty is becoming the key issue for makers.

“Since 2015, the primary driver of increases in luxury spending has shifted from consumers making their first purchases of luxury goods to incremental spending from existing luxury consumers,” the report said.

“This transition means that luxury-goods players need to invest more in building loyalty among existing customers than in recruiting new ones,” it said.