On the day Apple released its new iPhone 5C simultaneously in the U.S. and China, I tromped around Beijing asking yuppies, restaurant workers, and migrant street sweepers what kind of phones they use—and why. It’s hardly a scientific survey, but if the mood at the Yonghegong Costa Coffee shop is any indication, Apple’s marketing people have some work to do.
Costa Coffee, near Beijing’s Lama Temple, is the kind of place that attracts the type of latte-sipping young professionals who flocked to buy new iPhones two years ago. In fact, a fair number of its customers are still using older iPhones, but they expressed mixed feelings about whether they’ll stick with Apple (AAPL) in the future—or opt instead for the larger Android-powered Samsung (005930:KS) Galaxy smartphone, which is fast gaining popularity here. The iPhone 5C is routinely mocked as “not attractive.”
Slumped in a brown sofa, Susan Li, a prim, middle-aged teacher, toggles between the iPhone 4S she bought in 2011 and her work-issued IBM (IBM) ThinkPad. Both are “good enough,” she says, without enthusiasm; she’ll wait until her phone dies before replacing it. Zhang Ao, another iPhone 4S-user and a young cameraman for Beijing Television (BTV), looks up from the meal he brought in from a nearby KFC (YUM). He says the “wow factor” of owning an Apple product wore off long ago. He dismissed the new, brightly colored iPhone 5C as looking “like a cartoon.” He’s not sure what kind of phone he’ll buy next.
His BTV colleague, Angel Kang, who’s wearing black-framed hipster glasses and a svelte purple dress, says, “We are very happy that Apple released the new iPhone in China and the U.S. at same time. It’s a nice friendship gesture.” Not that she actually wants to own one. Kang says she’s very happy with the Samsung Galaxy she bought in July; she especially likes the larger screen size, which she says is better for shooting and viewing photos. Sitting nearby is Joey Zhao, who’s in town from Shanghai, where he works for a Japanese company that makes headphones. Zhao is also a Samsung Galaxy devotee and extols the virtues of the customizable Android operating system, “because I can put whatever I like on it.”
One employee of China Telecom (CHA), which has a partnership with Apple, declined to give her name but offered a theory on Apple’s diminished mystique in China. She says Steve Jobs was revered in China as a creative miracle. Now, she says, Apple is just an ordinary company controlled by businessmen.
For Apple to find long-term success in China, it needs not only to retain existing customers, but also to entice new smartphone shoppers—people lower down the income ladder. One target might be 35-year-old Chen Guibiao, who works at the Yunlin Delicious Kabob restaurant in Beijing’s Dongzhimen neighborhood. Chen is a migrant worker from rural Jiangsu province, but he has lived in Beijing for 16 years and has adjusted to city life. His job is to sit outside the restaurant on a little white plastic stool and yell at passersby, trying to entice them to dine inside: “Spicy food! Free parking!” Two years ago, Chen paid 2000 renminbi ($325) for his first smartphone, a white Samsung Anycall model. He says he’s ready to buy a new phone, but his upper price limit is 3000 renminbi ($490). Apple’s “cheap” new iPhone 5C—which will start at 4488 renminbi ($735) for the 16GB model in China—is still beyond his reach.
By the end of 2013, roughly 500 million people in China are expected to have smartphones. While that’s an impressive total, it also means many folks still aren’t online. At a park near the Russian embassy, Chen Sen, a 47-year-old street sweeper from Shandong province, sits on a wooden bench taking a smoking break. He fumbles in the pockets of his fluorescent-orange uniform vest to take out his “dumb” phone, a domestic-made Changhong model he bought four years ago for 200 renminbi ($30). A friend and fellow street sweeper, leaning on a broom nearby, shows me his 300 renminbi ($45) Nokia model.
Do they want to upgrade to smartphones? Chen shrugs. He still isn’t sold on why he needs to carry the Internet around in his pocket. But he adds that if he does go the smartphone route, the 799 renminbi ($130) Hongmi (“Red rice”) model from Xiaomi might be a possibility.