Top Biz News

Gray-market iPad orders power up

By Chen Limin and Wang Xing (China Daily)
Updated: 2010-03-19 10:01
Large Medium Small

Enterprising college students seek slice of Apple-hungry Chinese market

BEIJING: Jack Lee (not his real name) is a gray-market iPad seller in China - or at least he hopes to be.

For now, until Apple kicks off US sales of the much-hyped tablet PC in early April, all he has to sell is the future, promising delivery of the device by taking orders in advance.

Gray-market iPad orders power up

People attending a press event in San Francisco try out Apple’s iPad. From the iPod, to the iPhone, to the iPad, Apple has a tradition of delaying the launch of its latest product in China. [Agencies]

The New York-based postgraduate student's business model is simple: buy a 16G WIFI iPad in the US for $499 (3,407 yuan) and informally ship it directly to his online customers back in China, charging them 5,500 yuan for the privilege of having a gray-market one early. Subtract around $30 for shipping and another $45 to cover NY-sales tax, leaving Lee with a cool 1,890 yuan in his pocket.

To date, Apple hasn't said when or even if it plans to release the iPad in China. Apple China spokesperson Tiffany Yang refused to comment on this story.

While the 24-year-old Lee's idea may sound unique, he is actually far from alone in his venture. A review of popular online shopping website, taobao.com, reveals several hundred people are offering to flog Apple's new tablet for prices ranging from 3,500 yuan to 6,200 yuan.

So far, Lee's business is not exactly booming.

To date he has had 10 inquiries from people asking for details on ordering an iPad but only one person has put down a deposit for the device.

"Faithful Apple fans in China want to take a bite out of the 'new apple' as early as possible, and the market is coming," he said.

From the iPod, to the iPhone, to the iPad, Apple has a tradition of delaying the launch of its latest product in China compared with other countries, spurring complaints from potential domestic customers.

But that policy also benefited another group of consumers - overseas Chinese students, who make extra cash by purchasing products and selling them back to their counterparts at home.

"It's still early, but the business should be profitable," he said.

IPad will make its debut in the US on April 3, followed by Australia, Canada, some European countries and Japan in late April.

Apple's main revenue comes from mature markets such as the United States and the EU countries, but China's fast growing economy in recent years also created many new fans that show the same loyalty to Apple's stylish products as their foreign counterparts.

These consumers, according to industry experts, support much of China's huge smuggled iPhone market, where shipments reached about 2 million since 2007.

Appleinsider.com said the iPhone's slow start in China was attributed to a combination of relatively high prices for non-contract handsets, as well as widespread availability of iPhones on China's gray market.

And there are signs that the iPad may be subject to a similar fate in China.

Wang Heng (not his real name), another US-based student studying economics in Boston, is also looking to tap into the iPad market.

"Most of the students (who buy products in the US for Chinese buyers) pre-order iPads for wholesalers in Beijing's electronics' markets, and then earn a commission from them," said the 23-year-old.

According to Wang, wholesalers usually give them $20 to $30 as commission for each unit, so it's not as profitable as pre-ordering the tablets for individual buyers.

Related readings:
Gray-market iPad orders power up Apple unveils $499 'iPad'
Gray-market iPad orders power up Apple iPhone prices may drop in China
Gray-market iPad orders power up Apple's iPad may underwhelm Hollywood
Gray-market iPad orders power up Hanwang sells i-phone trademark to Apple for unknown sum

It is nearly impossible to know how many people like Lee are profiting from China' gray market, but San Shi, a student who has bought products for others over the years said that overseas students regularly make extra money in this fashion.

"It's illegal, but some of the students have to rely on what they earn from this business to cover their living expenses abroad," said the cyberspace reseller.

Although people like Lee help Apple to introduce their products to China - even if they don't have any marketing planned for iPad in the country.

According to one industry watcher, rampant smuggling actually makes it harder for companies to sell legal devices, especially when the smuggled one cost much less.

"It's not a bad thing for Apple in the short run because it doesn't have to pay a cent to sell its products in China," said Pang Jun, an analyst with research firm GFK China.

"But if it does plan to launch the iPad in China, smuggled goods are likely to affect its sales in the long run."