Yesterday’s eagerly awaited iPhone 4S launch in China quickly turned into chaos as an ugly brawl between gangs of professional scalpers grew out of control. Beijing SWAT teams intervened to calm down hundreds of angry customers and tame the rowdy lines. The New York Times explained that scalpers hired migrant workers to stand in the line and buy the phone. As Apple said it would not open the store, those individuals, identifiable by matching armbands or hats, got angry because they were not going to be paid.

An Apple spokeswoman issued the  following statement following the incident (via Reuters):

Unfortunately, we were unable to open our store at Sanlitun due to the large crowd. And to ensure the safety of our customers and our employees, iPhones will not be available in our retails stores in Beijing and Shanghai for the time being.

Instead, Apple noted, customers could order the iPhone 4S on the online Apple store or through one of the many China Unicom retail outlets, the country’s exclusive iPhone carrier. However, the iconic smartphone was out of stock on the Chinese online Apple Store at the time of this writing.

As you know, Apple rarely goes on the record unless absolutely necessary, so the statement is an indication of how the launch spiraled out of control. Moreover, the egg-throwing incident inspired funny remarks on Twitter. Really, who goes to buy a new iPhone with a pocket full of eggs? Let’s just hope this situation won’t snowball into a public relations nightmare and become a theme for another anti-Apple advert by Samsung.

In the meantime, one analyst pointed out that Apple must learn from this turmoil and consider launching its products in China and United States simultaneously. Another incredible riot clip, egg throwing video and additional tidbits are displayed after the break.


“This is a debacle,” said Shaun Rein, managing director of China Market Research Group, in a phone interview with Bloomberg, adding that “Everybody knows there will be massive numbers of people when Apple has this kind of a launch. This shows very poor retail management ability.” Even though most of the components that go into Apple’s products are provided by Far East makers — with actual products assembled in Taiwanese factories that employ cheap labor from China, the 1.33 billion people market is not enjoying preferential treatment from Apple. The company typically delays product launches in China for several months as the United States gets precedence. However, China is already one of Apple’s most important markets and the world’s biggest PC market. For example, nearly one in six dollars of Apple’s June 2011 revenue came from China and analysts are estimating that Mac sales in China will quadruple.

China is an “amazing opportunity” for Apple, Tim Cook said in a conference call last October. Apple’s problem is lack of stores in such a huge market. Its five flagship stores, including massive outlets in Hong Kong and Shanghai, are not enough to satiate Chinese appetite for the company’s popular mobile devices and computers.

 

Nicole Peng, a research director with analyst firm Canalys, explained that the Chinese have little patience regarding availability of latest technology:

(Chinese consumers) want to have the gadget as soon as possible, they don’t want to wait. If Apple launches the products earlier, consumers don’t need to feel like, ‘I’m already late, I need to get it quicker.’

She said consumers in China know little about availability of Apple’s products through other outlets, such as authorized retailers, due to a lack of communication on Apple’s part. Beijing-based Marbridge Consulting’s Mark Natkin said online ordering could help Apple mitigate shortages and accelerate launches in China:

The reality of the market is that there is a limited supply of product. Apple might want to consider another sales approach. Hopefully this incident will be a learning experience for them. 

Per data from Apple’s last quarterly earnings, Greater China has 7,000 points of sale for the iPhone. Contrast this to a total of 120,000 points of sale for the iPhone worldwide. Apple promised to open at least 25 new stores in China within the next few years and 40 outlets around the world in the next quarter, with 30 outside the United States.


Apple’s flagship store in Shanghai’s Nanjing East Road.

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