Apple Inc. (NASDAQ:AAPL) earned about $23.8 billion in China in 2012, almost 15 percent of its overall revenue. The iPhone maker had been increasing its presence in China since 2009 - when the sales of the company were under $1.0 billion for the year. Apple Inc. (NASDAQ:AAPL)'s growth in China is a result of the “enormous energy” it has put into overcoming legal and regulatory hurdles. The company added numerous points of distribution, including several of its own retail stores, and customized its software and user interface to the usage patterns of the local customer base. Even with the massive success, the penetration is still limited to the country’s developed regions, which leaves opportunities for further expansion.
In an online survey by Goldman Sachs Group, Inc. (NYSE:GS) of 801 consumers who own an iPhone, an iPad or both. The targeted respondents in multiple regions throughout China were questioned on their purchasing intentions and device usage, however, the survey was completed before the iPhone 5 was launched in the region. Here are the findings of the survey:
The survey reveals that 62 percent of iPhone and iPad users are “highly likely” to choose an Apple device for their next tablet or smartphone purchase, while 28 percent of the respondents are “likely” to stick with the platform. Such responses, as per the report, “indicates that Apple still appears to have an enviable level of customer loyalty in China.”
In responding to another question, 5 percent of the respondents, said “there wasn’t a discount that would make it worthwhile” to leave the Apple platform. The numbers were surprisingly less than the 21 percent who chose that answer in Goldman’s US-focused survey. The Chinese consumers, who consider switching, wanted on an average 27 percent discount, similar to the 33 percent discount cited by their US counterparts.
On question related to switching costs, which increases when users own both an iPhone and an iPad, about 72 percent of the respondents (having both iPad and iPhone), said that it was “highly likely” that their next smartphone or tablet would also be an Apple Inc. (NASDAQ:AAPL) product, against 47 percent who owned just one or the other.
Regarding apps and iCloud, 59 percent of the respondents said they download from the Apple App Store “frequently”, another 33 percent said they do so “sometimes”. Many of the respondents also use iCloud or plan to in the next 12 months. The trend becomes more important due to the lack of an officially supported iTunes Store, which shifts the responsibility for switching costs to the App Store and iCloud.
Overall, the report believes, Apple Inc. (NASDAQ:AAPL) has a far more promising opportunity in emerging markets than most investors recognize. As Apple’s basic strategy for success in China is applicable across other emerging regions as well, and “as the company hits its stride in China, we expect it will be able to direct more efforts toward other promising, underpenetrated regions.”