Sunday, May 19, 2024

Huawei Revamps Retail Strategy, Targets Apple with Flagship Store Expansion in China – TelecomLead

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Huawei is overhauling its retail approach by opening flagship stores in China, often strategically located near Apple outlets, as it aims to reclaim its top position in the world’s largest smartphone market.

The above chart from research firm IDC indicates Huawei has 17 percent share in China vs 15.6 percent for Apple.

Notably, Huawei’s newly renovated flagship store in Shanghai, situated directly across from Apple’s flagship location, occupies three floors of a historic building in the bustling financial district and includes a coffee shop and a gym, Reuters news report said.

Between December and February, Huawei launched four flagship stores in major Chinese cities, marking a significant marketing blitz for a company rebounding from U.S. sanctions imposed in 2019 that severely impacted its smartphone business. These sanctions had forced Huawei to rely on domestic parts, which it now sources successfully.

“The Huawei flagship store is very nice. It looks much brighter inside compared to the Apple Store across the street,” said Amy Chen, a 27-year-old physiotherapist who recently switched from an iPhone 15 Pro to Huawei’s top-end Pura 70 Ultra, seeking better mobile reception.

Huawei’s retail presence now includes 11 flagship stores in mainland China, a notable increase since it opened its first flagship store in 2019. In comparison, Apple operates 47 stores in the region. Ethan Qi, associate director at research firm Counterpoint, predicts that Huawei could open more than 20 flagship stores, eventually matching Apple’s footprint.

This expansion contrasts sharply with the situation in 2021 when Huawei’s licensed stores across China were shuttered due to product shortages caused by the sanctions. Since then, Huawei has developed its own chips and introduced popular 5G-capable products, leading to a resurgence in its market presence.

In the first ten months of 2023, more than 5,200 stores licensed to sell Huawei products opened, with over half in third and fourth-tier cities, significantly expanding Huawei’s distribution network.

This renewed push poses a significant challenge to Apple, which saw a 6.6 percent drop in iPhone sales in China in the first quarter, falling to 10.8 million units. In contrast, Huawei’s shipments surged by 110 percent to 11.7 million units, surpassing Apple to become China’s second-largest smartphone vendor.

Lucas Zhong, an analyst at Canalys, noted that Huawei had plans to expand its flagship stores since 2020, but U.S. sanctions slowed progress. Despite ongoing supply chain issues, Huawei’s new phones are receiving positive reviews, allowing the company to focus on premium products that directly compete with Apple.

Huawei’s latest Pura 70 Ultra smartphone, priced at 9,999 yuan ($1,300), matches the iPhone 15 Pro Max’s price. Meanwhile, competitors like Samsung and Xiaomi are keeping prices for their premium models lower amid soft market demand.

Huawei’s stores showcase a range of premium products, from smartphones to tablets, smartwatches, televisions, and even electric vehicles developed with Chinese automakers. According to Qi, Huawei’s extensive product line necessitates large demonstration areas, which distributors cannot typically accommodate.

The emphasis on physical stores reflects Huawei’s reliance on offline sales, with 70 percent to 80 percent of its sales occurring in physical locations, compared to Apple’s 40 percent online sales.

“Xiaomi, Oppo, and Vivo are all being affected by Huawei’s comeback,” said Toby Zhu, another Canalys analyst. “But for now, the biggest impact has been on Apple.”

The impact of Huawei’s resurgence is also being felt beyond mainland China. Simon Lam, owner of Trinity Electronics in Hong Kong, noted that more independent shops are now stocking Huawei devices. “People are willing to pay a lot of money for high-end Huawei, something other brands really can’t compare with,” he said.

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