Move over, Hermès. Take a seat, Louis Vuitton, Gucci and Chanel. In luxury brand-obsessed China, Apple has become the most desired brand of all.
That's according to a survey of 400 mainland Chinese millionaires with a personal wealth of at least 10 million yuan ($1.6 million). Apple Inc. is now the top choice for gifting, preferred over former No. 1, the Parisian jewelry and handbag maker Hermès, according to a Hurun Research Institute report released Thursday, another sign that the geniuses in Cupertino, California, have burrowed deeply into the hearts of China's wealthiest consumers. This augurs well for Apple's future in a country where status is strongly connected to so-called luxury brands.
Apple's iPhone 6 and iPhone 6 Plus became the top-selling smartphones in China over the holidays at a price point once thought inaccessible to most on the mainland. It’s a rank reflected in the company’s surging sales in China, which grew 70 percent, to $16.1 billion, over the the three months ended in December, leading to the largest quarterly profit in Apple's history.
While luxury fashion lines and watchmakers continued to dominate most of the top 10, consumer electronics gifting is on the upswing. In taking the No. 1 spot, Apple shot past fashion heavyweight Louis Vuitton at No. 2 for gifting by men, while Hermès dropped from No. 1 to No. 7 for gifting by men.
Driving Apple’s rise was the popularity of its iPhone 6 and iPhone 6 Plus, which also took it to the No. 1 spot for smartphone shipments in the country in the fiscal first quarter of 2015, according to Canalys. Despite Samsung’s plummeting mobile sales, the South Korean firm edged its way onto the list, taking the No. 10 spot for gifting by men and No. 9 for gifting by women.
Apple’s iPhones are hugely popular among China’s millionaires, but they have also found a place among middle-class consumers, for whom the large-screen smartphones are not only seen as a communication device but also as a status symbol.
"One of the major drivers for Chinese consumers to obtain the latest iPhone is the trendsetter or luxury kind of images Apple and its iPhone conveys," Julia Zhu, founder of China technology and e-commerce research firm Observer Solutions, said. "Many Chinese consumers are more turned on by the social status that comes with owning the latest version of iPhone than they are with the iPhone’s actual design and function."
Overall spending on gifts by Chinese luxury consumers is down 5 percent year over year and down 30 percent over the past two years. The decline follows the country's crackdown on corruption and luxury spending by public officials.
“The government’s crackdown on luxury gifting continues to have its effect, with luxury gifting down a further 5 percent year on year, taking it to 30 percent over two years,” Rupert Hoogewerf, Hurun Report chairman and chief researcher, said in a press release. “Travel retail continues to change the dynamics of luxury in China, with seven out of 10 luxury goods bought by Chinese now being bought overseas.”
While overall spending is down domestically, Chinese consumers have increasingly taken their money out of the country to spend on tourism and luxury goods. Chinese tourists spent $164.8 billion overseas in 2014, $113.6 billion more than spending from tourists visiting China, according to Chinese government statistics.
Despite the drop, Apple is looking to tap into China’s domestic market, with retail expansions planned over the course of the next two years to increase its physical presence in the country from 15 to 40 stores. The company plans to have five stores opened before Chinese New Year, Feb. 19.