U.S. News

Grey Market Begins Sales of iPads in China

Justine Lau, Andy Ho and Kathrin Hille, Financial Times

Most Apple fans outside of the US, for now, can only dream of buying an iPad, the latest gadget from the maker of the iPhone. But not Apple aficionados in China.

Apple Store
Flickr: hairygrumpy

The sleek tablet device officially became available only in the US last weekend but some mainland China and Hong Kong stores started selling “grey market” imports of the iPad at the start of the week. The chance to buy early, however, comes at a cost with grey imports in Hong Kong selling for a 50 per cent premium on the US$500 price in America.

Mainland China and Hong Kong have vibrant grey markets, whereby consumers can buy parallel imports – shipments of legitimate goods not intended for that market – of most foreign products.

As long as customers are willing to pay, they can buy almost anything, from handbags to electronic devices, before the official launch date. Volumes on the mainland can be impressive with grey market sales amounting to several times that of the later official imports.

When iPhone parallel imports started selling in China in 2007 – two years before it became officially available – the most basic phone cost more than Rmb8,900 (US$1,300), more than double the then US retail price.

However, it seems to be a different story with the iPad. Apple has not said when it will officially make the device available in Hong Kong but prices are already falling thanks to wide availability of parallel imports and weaker-than-expected demand.

In the popular Sincere Podium grey market mall in Mongkok, one of Hong Kong’s busiest shopping districts, stores are selling the 16 gigabyte iPad – the cheapest model – for about HK$5,900 (US$760), a premium of just over a half the US price of $500.

The 32GB model sells for HK$7,000 and the largest 64GB model costs about HK$8,000, both selling for roughly a $300 premium over US retail prices.

One of the stores, DHC Mobile, has cut prices by about 7 per cent since the start of the week to boost sales. The company has sold about 160 iPads and has roughly 60 in stock. Andus Lau, the shop owner, says the iPad has been only “half as popular” as the iPhone when it was launched.

“Unlike mobile phones, iPad is not something that people need to use everyday,” says Mr Lau.

One major drawback for Hong Kong consumers is that iPad users can only input simplified Chinese characters – the standard in mainland China – instead of the complex version of Chinese characters commonly used in Hong Kong and Taiwan.

In contrast to Hong Kong, queues for the iPad in Beijing are still long because each dealer can only provide about a dozen a day at present. Prices are expected to fall as soon as this weekend, however, when retailers expect big shipments of parallel imports to arrive.

While retailers are currently asking for Rmb6,500 for the 16GB model, its price is expected to drop to Rmb4,950 once supplies increase.

For those who want to pay even less, Shenzhen – a mecca for shoppers looking to pick up cheap copies of branded gadgets – provides plenty of alternatives.

Retailers in the southern city have been selling tablets that resemble – but are not identical to – iPads since August. Costing as little as Rmb2,200, they are generally much thicker than the iPad and screen sizes vary from 7 to 10 inches. In contrast to the iPad, most have internal hard drives and USB ports. However, their batteries run out more quickly than the iPad’s advertised battery life.

Chinese manufacturers reject the idea that they are copycats. One company has even claimed that Apple copied its idea. Shenzhen Great Loong Brother Industrial, which has been selling a tablet computer that looks similar to the iPad since last year, says it is considering suing Apple.

“We are at the forefront, the pioneers,” says Huang Xiaofang, assistant to the general manger at the company. “We reserve the rights to sue Apple.”

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