People wearing face masks walk past an Apple store in Beijing on March 17, 2020 in Beijing, China.
Fred Lee | Getty Images
Smartphone makers in China including Huawei and Apple are turning to super-fast deliveries and even trade-ins at the door of consumers’ homes as shoppers remain cautious about visiting busy stores in the wake of the coronavirus outbreak.
Meituan, a Chinese firm most known for food deliveries, signed a deal with Huawei franchise stores. Users in three cities — Beijing, Shanghai and Wuxi — are now able to buy Huawei’s new P40 smartphone via the Meituan app and have it delivered to their residence. The P40 went on sale on April 8 in China. Meituan deliveries can come in 30 minutes depending on a user’s distance to the store.
The delivery firm will also onboard other brands including Chinese firm Vivo soon, a person familiar with the matter told CNBC. The person was not authorized to speak publicly as the Vivo deal has not been announced.
Last month, JD.com, one of China’s largest e-commerce firms and rival to Alibaba, launched a trade-in service for Apple products that can be done at a customer’s doorstep. The program includes Apple’s recently-launched iPad Pro and Macbook Air as well as iPhones. Usually, such trade-in programs require shoppers to go to physical stores.
The initiatives are a response to the coronavirus epidemic in China which saw stores shut down for prolonged periods of time and people remaining indoors. The effect of the outbreak, according to one estimate from February, is that China’s smartphone shipments could fall 30% year-on-year for the March quarter.
Even as China’s new coronavirus cases remain low, analysts said vendors might be experimenting with more with online shopping because customers may be cautious about returning to stores.
“I think players are not yet sure whether their consumers have changed after the lockdown period, whether they are starting to completely move onto an online method, non-touch method, because they’re still cautious about going to the store,” Nicole Peng, vice president of mobility at market research firm Canalys.
One of the effects of the coronavirus in China was the shutting down of retail stores for a long period of time after the Lunar New Year holiday in late January. Apple’s stores only fully re-opened in March. Shutdowns and other measures meant to contain the virus kept people indoors for a long time.
Peng said that built “pent-up demand” from consumers during that time.
Peng said that industry players have been telling her that their offline channels or physical stores, have been “recovering faster than they expected” with the retail market seeing a “heavy bounce back” since the end of February.
“The China market has been recovering quite well given there was some pent-up demand before and during the lockdown,” Peng said.
But there are reasons to be cautious given the economic environment in China. The average estimate of 17 Chinese financial firms for first-quarter gross domestic product (GDP) is a contraction of 3.4%, according to Wind Information. Meanwhile, China’s urban unemployment rate jumped sharply in February.
“The market is starting to see Covid-19’s effects on the economy itself … So I’m not quite sure this demand is going to last,” Peng said. “Hence it’s important for them (smartphone makers) to test and try many different methods to reach out to consumers.”
China key for Apple, Huawei
Exploring more methods to reach consumers in China could be very important for companies like Huawei and Apple given how crucial a market it is for both firms.
Huawei was put on a U.S. blacklist last year which restricted its access to American technology, including Google’s Android mobile operating system (OS). Huawei was forced to release two major devices without Android and Google’s licensed apps such as Gmail. This is not a big deal in China where Google services are banned and consumers are not using those apps anyway. But in international markets, where Huawei has made ground, the lack of Android has hurt the company.
Huawei looked to double down on China, which now contributes a significant portion of smartphone sales for the firm. Meanwhile, China has for a long time been a big chunk of Apple’s revenue and a huge part of the supply chain.
After the prolonged shutdown of stores and with the coronavirus impacting the company’s other major international markets, Apple will be hoping these new consumer initiatives can help boost sales of its key products.
But the delivery initiatives could also benefit the likes of Meituan and JD.com, too. Meituan has been trying to diversify away from just food and grocery deliveries. It has a hotel and travel booking arm. And consumer electronics could be an emerging area for the company.
Meanwhile, JD.com is locked in a fierce battle with Alibaba for share of China’s e-commerce market. The company is best-known for its fast delivery service, which it is trying to use in its smartphone trade-in programs.