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Originally published April 25, 2011 at 5:37 PM | Page modified April 26, 2011 at 10:49 AM

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For Chinese, Apple's shine not lost in translation

Apple has imported its retail philosophy to four stores in China so far — two in Beijing, two in Shanghai — and has created an instant following among consumers who can be as fussy and demanding as any in the world.

San Jose Mercury News

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SHANGHAI — While many Western retail giants have failed to translate their American success in China's booming economy, Apple is winning simply by being Apple.

Not far from the massive glass cylinder and spiral staircase that leads to Apple's always-crowded underground store in the heart of Shanghai's gleaming financial center of high rises and high-end stores is a shuttered Best Buy.

Home Depot, another retailer that has seen its successful American strategy sputter in this emerging economic giant, has retreated as well, closing a number of outlets and reconsidering its five-year China business plan. Mattel recently abandoned its flagship Barbie store in this metropolis of 19 million people.

Apple is bucking that trend.

The Cupertino, Calif.-based company, which plans to have 25 retail stores open in China in coming months, has imported its retail philosophy to four stores in China so far — two in Beijing, two in Shanghai — and has created an instant following among consumers who can be as fussy and demanding as any in the world.

Its first China store, a split-level space in a pricey shopping and nightclub area of Beijing called Sanlitun, is itself packed like a hot nightclub most evenings. The new 16,000-square-foot Shanghai outlet — located in the shadow of the iconic Oriental Pearl Tower — has the minimalist aura of an art gallery. Customers studiously examine iPhones, iPads and MacBooks with the focus of graduate students prepping for oral exams.

Much like in the U.S., Apple in China has attained a certain corporate celebrity status — though here the affection comes with a particular Chinese intensity.

Shoppers pose for pictures in front of Apple's products and logo. Last fall, the launch of the iPhone 4 created such a frenzy that fighting broke out at the Sanlitun store, which was temporarily shut down before reopening with a squad of security guards posted inside.

The popular iPhone 4 is still in short supply while Apple's iPad 2, which has yet to officially go on sale in China, is going for at least $1,000 on the black market, hundreds of dollars more than its retail price. One recent evening, a scalper standing outside the Sanlitun store sold a new 16-gigabyte iPhone 4 for $900, also hundreds more than Apple's retail price. Apple's China website says iPhones are sold out, though consumers can get the devices through its carrier partner China Unicom with a contract.

Some Apple products are more expensive in China than in the United States. For instance, the 13-inch MacBook Air with 128GB of flash storage sells for about $1,604 in China, roughly $180 more than in the U.S., including tax.

But prices of the first version of the iPad, still being sold in Apple's China retail stores, are about $100 less. Apple sells only its Wi-Fi-enabled iPad in China because it has yet to reach an agreement with a local telecom to roll out its 3G version.

Apple's stores — and the personal attention employees in T-shirts shower on customers at the Genius Bar and during one-to-one tutorials — are now well-known in the U.S., but there has never been such a retail experience in China, observed James Roy with the China Market Research Group.

"It's very awe-inspiring," said Shi Yong, 30, who visited Apple's store in Shanghai's Pudong area two consecutive days last week. "Visually, it's very stimulating."

The experience could not be more different from typical electronics malls in China, where products are hawked by barkerlike vendors jammed in cubicle retail spaces along narrow aisles.

Piper Jaffray analyst Gene Munster, who regularly visits Asia, believes mainland China alone — excluding Hong Kong and Taiwan — will represent 10 percent of Apple's revenue within five years, up from about 2 percent today.

For now, Apple has shown it can do what other American retailers can't — succeed outside its own turf in China, analysts say.

Best Buy, for instance, tried to compete with two very strong local retailers, Gome and Suning, which offered similar products at lower prices, Roy said, adding that Best Buy "could not make money off software or video games like it can in the U.S. because the vast majority of consumers in China buy pirated versions."

While many Chinese buy cheap knockoffs of Apple products, plenty of others are more than willing to pay top price for originals — and the reliability and status that come with them.

Apple painstakingly picks prime locations for its stores. The Pudong outlet, a spacious store awash in natural light, is called "the Temple of Apple" by retail analyst Paul French, of Shanghai-based Access Asia. Product adoration crossed a number of age groups one recent afternoon at the store, from teens sipping milk tea to professionals getting assistance on Macintosh software. Young couples cuddled over iPads as music, from hip-hop beats to the Beatles, filled the air.

"They've got great products, and they are doing this at a time when Chinese consumers are feeling bullish and have some money," French said.

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