Yes, it was the big outlet Apple needed to make China fully worth the effort in terms of penetration, but China Mobile was the last of the major carriers in the world that wasn’t yet promoting Apple’s products.
See, all the major wireless service providers in the United States, as well as Europe, have been offering the iPhone for a while, and although the response has been amazingly strong, saturation and the ensuing slowing-growth rate it causes is becoming a problem in the much more mature U.S. and European markets.
Indeed, Apple’s market share in Europe shrunk by 6.5% in Europe late last year, and fell by 9.9% in the United States for the same three-month period of 2013, according to data from CNET. Apple’s market share in China is apt to hit a similar wall a couple of years from now.
Point being, Apple has little left for a revenue encore on the partnership front now that the China Mobile deal has been inked.
As for the Tmall store, it remains to be seen whether China’s consumers are willing to shell out big bucks — sight unseen — to an online reseller for an Apple device. Consumers still will need to find a wireless service provider in order to make the iPhone work, so why not simply buy said phone from the carrier itself? In fact, odds are good that shoppers will find a better deal through one of the carriers, who are now forced to compete with one another on the selling price of the iPhone.
And as for MacBooks, iPods and iPads being available through Tmall … well, while China is warming up to online shopping, Best Buy (BBY) learned the hard way that China’s technology consumers also love to browse/rummage through stores. Or, barring that, a visit to one of Apple’s retail stores in China may be preferable to an online purchase.
Oh, AAPL certainly will find some success via the Chinese shopping site, as electronics seem to be one of the more popular categories for the online shopping mall. But it’s tough to imagine Apple will sell millions and millions of their devices via Tmall, especially at the premium prices Apple generally expects.
Yes, 2014 could be a very good year for AAPL stock, mostly thanks to new partner China Mobile, and less in part to its presence at Tmall. If Apple can reach the high end of its Chinese iPhone sales outlook of 20 million units this year, that translates into additional revenue of around $9 billion and an extra $3 per share in earnings for 2014, at least according to Sanford Bernstein’s Toni Saccanaghi. The following year should be a good one as well, as China Mobile continues to drive Apple’s penetration into China.
Beyond 2015, though, AAPL has few options left for simple revenue growth. Apple will then once again have to rely solely on product innovation to drive the big growth that shareholders have come to expect … and innovation hasn’t exactly been Tim Cook’s strong suit.
It could be a good two years between now and then, however.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.