Apple's China store-to-customer ratio could 'harm sales'

Summary:Apple has a remarkably low store-to-customer ratio in China that could see the technology giant's retail sales suffer if it does not ramp up its mainland expansion.

Apple has only one retail store per 216 million Chinese citizens.

In 2010, then Apple retail boss Ron Johnson, who since departed to join J.C. Penney, said there would be at least 25 stores in China by this year.

Two years after he left, there are only six stores: two in Beijing, three in Shanghai, and a recently opened store in Hong Kong.

In comparison, Massachusetts has 10 stores for a population of around 7 million, while London has half the number of stores for about the same population.

The population of China stands at 1.35 billion, yet Apple earns a fifth of its revenue from China. 

A Reuters report warns that a slow expansion to push down the extremely high store-to-customer ratio could harm "more than just sales." A further investment in the retail store space could see Apple's profits soar even more than they already are.

While Apple products can be bought through its online stores, a retail presence solidifies a relationship with a country or region. Many customers prefer to test products before they buy at a retail store location, but the few stores per population makes it difficult for Apple to not only keep up with demand, but also for store visitors who travelled long distances to buy Apple's products.

Red tape and government bureaucracy plays a part, it goes without saying. China has already shown its reluctance to aid non-Chinese companies in expansion or during legal proceedings, by often favouring Chinese companies over foreign firms in intellectual and trademark infringement cases.

However, the Chinese government said Apple is looking to open further stores in Chengdu and Shenzen districts; the latter being is home to Proview, a company Apple has seen recent battles with over the 'iPad' trademark.

Apple's chief executive Tim Cook's recent trip to China could open the gates for further diplomatic ties between the country and the iPhone and iPad maker --- two of the company's flagship products.

For now, Apple needs to refocus its investment in China: treating it as a traditional emerging market, but one that has a vast developed population base. By doing so, it can secure a hold on the burgeoning market, but also keep competitors like Samsung at bay.

Topics: Apple

About

Zack Whittaker writes for ZDNet, CNET, and CBS News. He is based in New York City.

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