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Apple, branded in the Middle Kingdom

In 1997, I interviewed a senior Apple executive who was in Hong Kong to discuss Cupertino's strategy. At the time, Apple's market-share for their Macintosh brand of computers hovered at about three percent, and Microsoft had just taken a US$150 million stake in Apple. Windows and Internet Explorer owned personal-computing mindshare.

Rumors that Apple would go bankrupt were rife, so I led with that question. The executive looked me in the eye.

"We have a user-base of fifty million," he said. "We're not going anywhere."

I knew what I meant, because I was one of those fifty million. Before smartphones, when Net access was via dial-up modems which blazed at 56 Kbps (if you were lucky), I'd been using the Mac for a decade. Now, it's 25 years.

Apple's user-base is uncountable now. Execs entranced with the iPad decide to get a Macbook Air for a family-member, then buy a second for themselves. A sample of recent quotes from Macworld UK:

"Apple now sells one device for every two Windows devices, revealing that Microsoft's huge advantage in the platform wars has rapidly decreased since the early 2000s, when the ratio was 56 Windows devices to every one Apple device."

"A study has highlighted the loyalty of iPad and iPhone users, who are so unlikely to switch from Apple's iOS to another platform that Goldman Sachs analyst Bill Shope believes they are worth almost US$295 billion cumulatively, which is more than half of Apple's current market cap. Apple Insider reports that Shope conducted a consumer survey of more than 1,000 Apple device owners, and...the average single iOS customer is worth US$1,053 to Apple."

It's gratifying to know I'm worth over a grand to the brain-trust in Cupertino. Makes up for all the noise I've taken from Windows-users over the years...well, no it doesn't. It's beside the point. I use Macs for the same reason I always have: they work better for me. If I were a programmer, I'd use a Linux box. Elegant design is always nice, but the tools that work are the ones to use.

But back in '97, the executive was visiting Hong Kong to help determine Apple's China strategy. Still a work in progress, but now it's about brand-equity.

Although few would have believed it back when "MacHeads" were deemed flakes and weirdos by computer-users in navy-blue suits with yellow "power-ties," Apple is now among the world's premier brands. And in China, this brand is a double-edged sword.

On one hand, you have a handful of genuine Apple Stores in China, all along the Beijing/Shanghai axis, and extending down to the HKSAR. Limiting the number of retail-outlets creates the impression of exclusivity essential to luxury brands. Some people will line up just to enter a store if they think they'll have an exclusive experience rather than a retail transaction.

On the other hand, the lack of genuine Apple Stores in China has created myriad opportunities for the Middle Kingdom's creative entrepreneurs, who are seldom hindered by details like intellectual property. According to David Wolf, chief executive of Beijing-based consultancy Wolf Group Asia, bad consumer experiences at unauthorized shops are common. Clearly, damage to brand-equity isn't of concern to the shopkeepers.

Apple has announced plans to expand its retail network in China, and the settlement with Shenzhen-based Proview over iPad trademark-rights removes one stumbling-block. As China's growing middle-class realizes that buying the real deal from Apple results in better productivity and customer-satisfaction, awareness of quality-control will get another boost. This is important in China, where shoddy consumer-goods often motivate mainlanders to visit Hong Kong and Macau to purchase items of known-quality (everyone knows why pharmacies in both these SARs feature large stacks of milk-powder cans).

As genuine Apple products compete with the fakes, devices with the iconic Apple logo in China may morph from "branded" to "brand."

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