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Two fake Apple stores in China ordered to close

post #1 of 36
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Two fake Apple retail stores in the city of Kunming, China, have been ordered to close because they do not have official business permits.

The stores were allegedly not in trouble for copyright infringement, but only because they did not have the proper business licenses, according to Reuters. Three other counterfeit Apple stores that operate without Apple's authorization remain in Kunming.

The city's investigation was prompted by Internet attention that began last week, when it was revealed that knock-off Apple retail stores even feature employees wearing blue t-shirts, just like a real Apple Store. Officials in Kunming reportedly verified that the five self-branded "Apple Stores" sold official Apple products without the Cupertino, Calif., company's authorization.

A spokesman for the city's government said they went to "great steps" to ensure that the stores were not selling counterfeit Apple products. They also said they are investigating whether Apple applied with the Chinese government to have the design of its stores protected by law.

The report noted that Chinese law does prohibit companies from copying the "look and feel" of other retail stores, but added that enforcement and trademark protection in China are "often spotty." While piracy is a known rampant problem in China, the idea of a counterfeit store -- one so believable that some employees believe they actually work for Apple -- is new.

Credit: BirdAbroad

After the news broke, some customers began returning to the counterfeit Apple stores with their recent purchases, demanding proof that the products are genuine and not knock-offs. The city's investigation reportedly found that all five Apple stores in Kunming sell genuine Apple products bought from other authorized resellers.

There are a total of just four official Apple retail stores in China, but the company plans to open a total of 25 in the
post #2 of 36
So, wouldn't the warranty be void if a product us purchased from an unauthorized source? ...not that Apple would want to anger their customers that way, though.. Just wondering.
post #3 of 36
Quote:
Originally Posted by AppleInsider View Post

Two fake Apple retail stores in the city of Kunming, China, have been ordered to close because they do not have official business permits.

The stores were allegedly not in trouble for copyright infringement, but only because they did not have the proper business licenses, according to Reuters. Three other counterfeit Apple stores that operate without Apple's authorization remain in Kunming.

So, in China, it's OK to steal others' intellectual property as long as you pay the government their cut. Got it.
"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
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"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
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post #4 of 36
If the store is getting it's products from other authorized resellers, what price are they paying? Apple usually has strict policies not letting their dealers undercut prices. The store needs to make a profit, pay employee salaries, etc. So either these fake stores are selling Apple products at higher prices, or the authorized dealers they are getting their products from are likely in violation of their contract with Apple and selling product to the fake stores at lower than retail price.

I wouldn't be surprised to find that the authorized dealers are in collusion with the fake stores.
post #5 of 36
At it's best. No worry about oppressive government interference in raping the customers - not like her in the US.
post #6 of 36
IMO western retailers are going to have major problems selling their products in china. Especially companies like Apple that have to protect their IP. Am I the only one who sees big problems for the west in China overall? The potential for relationships to be strained and American companies leaving seems high at this point. Not unlike businesses that attempted to move into Russia. The system for buyouts, payoffs, bribery, corruption and threats was cited by a personal friend of mine (who's job it is to asses these problems) as the reason Western companies were leaving. Doesn't seem much different in China to me.
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post #7 of 36
Wondering how you can be profitable in this way if you have to purchase from other retailers. I assume that their product is not being purchased from the Apple Store, so where could you purchase at enough of a discount that would keep the doors open?
post #8 of 36
I love that guy in the photo!!! How can he remain at that angle without falling?
post #9 of 36
Is anyone surprised at all by these fake stores? Any company that does business in China deserves what it gets.

The biggest strategic mistake the US made with China was during the Clinton administration, when the US approved China's admission into the WTO. China gave lip service to human rights and respect for IP and environmental issues in order to get into the trade group, then promptly ignored it all.

Greed is the only reason any company does business with China. The planet would be better off if humans could overcome that motivation.

I'd be willing to bet that during negotiations to bring the iPhone to China, Apple was asked to make phones brickable to squelch dissidence. And the reply was probably along the lines of "You can do that at the carrier level," NOT "You're considering that? We won't sell to you."
post #10 of 36
Quote:
Originally Posted by jragosta View Post

So, in China, it's OK to steal others' intellectual property as long as you pay the government their cut. Got it.

Er yeah, this isn't exactly a new thing.

Quote:
Originally Posted by Wiggin View Post

If the store is getting it's products from other authorized resellers, what price are they paying? Apple usually has strict policies not letting their dealers undercut prices. The store needs to make a profit, pay employee salaries, etc. So either these fake stores are selling Apple products at higher prices, or the authorized dealers they are getting their products from are likely in violation of their contract with Apple and selling product to the fake stores at lower than retail price.

I wouldn't be surprised to find that the authorized dealers are in collusion with the fake stores.

I'd say it's more likely they just buy them from the people producing them, unless the products are completely fake as well. After all this is an entirely fake Apple store. It's not exactly uncommon though for the actual manufacturers in China to have products sold to places like this by people that work at the factorys.

Quote:
Originally Posted by spliff monkey View Post

IMO western retailers are going to have major problems selling their products in china. Especially companies like Apple that have to protect their IP. Am I the only one who sees big problems for the west in China overall? The potential for relationships to be strained and American companies leaving seems high at this point. Not unlike businesses that attempted to move into Russia. The system for buyouts, payoffs, bribery, corruption and threats was cited by a personal friend of mine (who's job it is to asses these problems) as the reason Western companies were leaving. Doesn't seem much different in China to me.

Well the biggest difference is there's not many other places to get products produced for such a low price, and the other places all have the same issue.
post #11 of 36
Quote:
Originally Posted by timgriff84 View Post

I'd say it's more likely they just buy them from the people producing them, unless the products are completely fake as well. After all this is an entirely fake Apple store. It's not exactly uncommon though for the actual manufacturers in China to have products sold to places like this by people that work at the factorys.

In this case that's very unlikely. Foxconn is not going to let large quantities of product just 'disappear' and neither of course would Apple. Much more likely this guy just bought in bulk from a friendly authorized reseller.
post #12 of 36
Quote:
Originally Posted by Satorical View Post

I'd be willing to bet that during negotiations to bring the iPhone to China, Apple was asked to make phones brickable to squelch dissidence. And the reply was probably along the lines of "You can do that at the carrier level," NOT "You're considering that? We won't sell to you."

First off carriers can't brick the phone, all they can do is terminate the SIM - easy enough to switch SIMs. Second, do you think that Chinese dissidents would be in a better position if companies weren't willing to sell mobile phones in China because the Chinese government might try to brick them? Really?

Presumably you'd like to see western sanctions against China, given how well that's worked against Cuba? Sorry but it seems very hard to believe you're motivated by concern for the Chinese people.
post #13 of 36
Quote:
Originally Posted by timgriff84 View Post

I'd say it's more likely they just buy them from the people producing them, unless the products are completely fake as well. After all this is an entirely fake Apple store. It's not exactly uncommon though for the actual manufacturers in China to have products sold to places like this by people that work at the factorys.

Quote:
Originally Posted by cloudgazer View Post

In this case that's very unlikely. Foxconn is not going to let large quantities of product just 'disappear' and neither of course would Apple. Much more likely this guy just bought in bulk from a friendly authorized reseller.

While it's possible that a small number of Apple product "fell off the truck", I'd agree with cloudgazer that it's unlikely. I know people who make business trips to China and return with dozens of DVD movies they bought for just a couple bucks. (Bought/sold out in the open, so you can't claim Chinese officials couldn't shut this down if they wanted to.)

They are the real disc, but in sleeves instead of the normal DVD boxes. So I'd guess it's realatively easy for a spindle of a couple hundred DVDs to walk off the factory floor in someone's lunch box without anyone noticing. Print off copies of the DVD cover, slip it in cheap sleeves and you are all set to give your people cheap movies and a way to get foreign cash into your country from international visitors. It's a win-win for the home team, so why would the government interfere?

But Apple products are worth 100s-1000s of dollars each and are a likely kept better track of individually. And from the sounds of it, are complete with the normal Apple packaging which would make it even harder for large numbers to walk off unaccounted for. So the products themselves are more likely bought from a reseller. But even if that transaction is proper, the branding of the stores is a clear violation...in every other country in the world except China. Note that the two stores which were closed were only closed because they didn't pay the goverments business license fee. Once that's paid they will likely be reopened.

The best thing Apple could do is to get the rumored factories in Brazil up and running. The threat of moving more production out of China might get a little better cooperation from the Chinese government.
post #14 of 36
Please, could we have at least one of those fake apple store in Romania?
post #15 of 36
Quote:
Originally Posted by justbobf View Post

So, wouldn't the warranty be void if a product us purchased from an unauthorized source? ...not that Apple would want to anger their customers that way, though.. Just wondering.

I believe that in the US, Apple can place that rule and has. Whether that is allowed in China, I don't know. But if it is, then these folks are screwed. Unless the products were bought at an authorized shop first and then resold. For some of the products they could be getting them from the actual Apple stores in China at a discount as a business (claiming to do something other than reselling I'm sure) and then reselling them full price. Or getting them from outside of the country when the exchange rates are in their favor. and so on.
post #16 of 36
I read that there were five fake Apple stores, so it looks like there are still three stores which needs to get shut down.
post #17 of 36
Quote:
Originally Posted by Wiggin View Post

If the store is getting it's products from other authorized resellers, what price are they paying? Apple usually has strict policies not letting their dealers undercut prices. The store needs to make a profit, pay employee salaries, etc. So either these fake stores are selling Apple products at higher prices, or the authorized dealers they are getting their products from are likely in violation of their contract with Apple and selling product to the fake stores at lower than retail price.

I wouldn't be surprised to find that the authorized dealers are in collusion with the fake stores.

The grey market typically works like this: Authorized dealers order more product than they can sell retail. Larger quantity orders often result in deeper wholesale discounts from distributors. The excess product is flushed into grey market channels, aka unauthorized sellers. The authorized dealers can sell the excess at cost, or even below cost, because they get the product they can actually sell at retail at lower cost. Apple used to have a pretty lively grey market in the U.S. but I believe that Apple shut it down by leaning on authorized dealers, even before Apple started opening retail stores of their own.
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post #18 of 36
Quote:
Originally Posted by Dr Millmoss View Post

Larger quantity orders often result in deeper wholesale discounts from distributors.

Sounds about right, but I don't think Apple uses a middleman distributor. I think they ship directly to resellers. It should be a relatively simple matter to impose inventory controls (requiring bills of sale to account for the disposition of all product shipped) and to make surprise visits to resellers suspected of playing this game to verify that "unsold inventory" is actually on the shelf. Shut down a couple of resellers for violating rules and others would likely stop doing this.

Anyone out there know if Apple has wholesale tiers for larger buys? If not, margins would be pretty thin for these clowns. After all, the crooked authorized reseller is going to need to make a profit from their scam, or why do it? So whatever small profit authorized resellers are making would be reduced significantly at the gray market level.

Something tells me there is more going on here than the gray market model suggests.
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post #19 of 36
Quote:
Originally Posted by Robin Huber View Post

Sounds about right, but I don't think Apple uses a middleman distributor. I think they ship directly to resellers. It should be a relatively simple matter to impose inventory controls (requiring bills of sale to account for the disposition of all product shipped) and to make surprise visits to resellers suspected of playing this game to verify that "unsold inventory" is actually on the shelf. Shut down a couple of resellers for violating rules and others would likely stop doing this.

Anyone out there know if Apple has wholesale tiers for larger buys? If not, margins would be pretty thin for these clowns. After all, the crooked authorized reseller is going to need to make a profit from their scam, or why do it? So whatever small profit authorized resellers are making would be reduced significantly at the gray market level.

Something tells me there is more going on here than the gray market model suggests.

In the U.S. you are probably right about Apple's retail distribution, but with only four Apple Stores in all of China and probably hundreds of authorized dealers, they likely use third-party distributors. This is much easier to manage than working directly with scores of dealers one-on-one. The distributors can use tiered wholesale pricing even if Apple does not. Controlling how product moves through the retail channels is probably near to impossible in China, even if they really wanted to. I say this because most manufacturers turn a blind eye to grey marketers. The retailers who feed the grey market aren't crooked, they're just gaming the system.
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post #20 of 36
Quote:
Originally Posted by Dr Millmoss View Post

In the U.S. you are probably right about Apple's retail distribution, but with only four Apple Stores in all of China and probably hundreds of authorized dealers, they likely use third-party distributors. This is much easier to manage than working directly with scores of dealers one-on-one. The distributors can use tiered wholesale pricing even if Apple does not. Controlling how product moves through the retail channels is probably near to impossible in China, even if they really wanted to. I say this because most manufacturers turn a blind eye to grey marketers. The retailers who feed the grey market aren't crooked, they're just gaming the system.

Makes sense. But I would love to hear from someone who has personal knowledge about how Apple handles overseas distribution, particularly in China. Also would be good to know just how many authorized dealers are located there. But you are probably right that no matter what Apple does they will have to continue to deal with issues like this.
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post #21 of 36
Apple could just take over the unauthorized stores. Save a lot of groundwork!

post #22 of 36
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Originally Posted by cloudgazer View Post

First off carriers can't brick the phone

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... at night.

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post #23 of 36
Quote:
Originally Posted by fishstick_kitty View Post

I love that guy in the photo!!! How can he remain at that angle without falling?

He's the coolest dude on the net right now. Let's start a meme on it.

Still, it looks busier than the MS Stores and probably doing better business.
post #24 of 36
I think these are pretty awesome. Not that I condone them but the level of effort put into them to fool the customer is pretty awesome.
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post #25 of 36
Quote:
Originally Posted by Robin Huber View Post

Anyone out there know if Apple has wholesale tiers for larger buys?

Ingram Micro and TechData both stock Apple products if that's what you mean...
post #26 of 36
Quote:
Originally Posted by lightstriker View Post

He's the coolest dude on the net right now. Let's start a meme on it.

"diagonal planking"

post #27 of 36
Quote:
Originally Posted by solipsism View Post

Not that I condone them but the level of effort put into them to fool the customer is pretty awesome.

I was going to say the same thing about Samsung

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post #28 of 36
this is odd that you can get away with just going from store to stoer and then commit what seems to be day light robbery, at first but at the end of the day they still sell apple products at the right price and buy them from apple (hopefully) so if thats the case its no differant from buying your ipad at pc world etc... except for the fact you get are being misled i dont have a problem with this.. infact when i go to china i would like to go to one of these fake store's
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post #29 of 36
Quote:
Originally Posted by benanderson89 View Post

IMEI Number - learn it and love it

Still doesn't brick the phone, you can switch it to another network, or use it on wi-fi only.
post #30 of 36
Quote:
Originally Posted by fishstick_kitty View Post

I love that guy in the photo!!! How can he remain at that angle without falling?

Hours of gruelling training by "Apple".
post #31 of 36
Quote:
Originally Posted by bboybazza View Post

this is odd that you can get away with just going from store to stoer and then commit what seems to be day light robbery, at first but at the end of the day they still sell apple products at the right price and buy them from apple (hopefully) so if thats the case its no differant from buying your ipad at pc world etc... except for the fact you get are being misled i dont have a problem with this.. infact when i go to china i would like to go to one of these fake store's

Only thing is I wouldn't trust the products I buy from them. They could be stolen, improperly obtained, have warranty issues, not registered properly in the Apple serial and warranty database, etc.
post #32 of 36
Quote:
Originally Posted by spliff monkey View Post

IMO western retailers are going to have major problems selling their products in china. Especially companies like Apple that have to protect their IP. Am I the only one who sees big problems for the west in China overall? The potential for relationships to be strained and American companies leaving seems high at this point. Not unlike businesses that attempted to move into Russia. The system for buyouts, payoffs, bribery, corruption and threats was cited by a personal friend of mine (who's job it is to asses these problems) as the reason Western companies were leaving. Doesn't seem much different in China to me.

There are huge challenges with China but still:

1. Western companies are able to exploit the cheap labour and manufacturing costs
2. Western companies want to sell their products to the rising middle and upper class
3. The Chinese might be dodgy but they want to make money at the end of the day

Sadly, in our current global economy the risk of getting burnt is deemed well worth it by many companies from all corners of the world.
post #33 of 36
Quote:
Originally Posted by Satorical View Post

Is anyone surprised at all by these fake stores? Any company that does business in China deserves what it gets.

The biggest strategic mistake the US made with China was during the Clinton administration, when the US approved China's admission into the WTO. China gave lip service to human rights and respect for IP and environmental issues in order to get into the trade group, then promptly ignored it all.

Greed is the only reason any company does business with China. The planet would be better off if humans could overcome that motivation.

I'd be willing to bet that during negotiations to bring the iPhone to China, Apple was asked to make phones brickable to squelch dissidence. And the reply was probably along the lines of "You can do that at the carrier level," NOT "You're considering that? We won't sell to you."


Ironically, if you ask an average Chinese, he would say it was the biggest strategic mistake of China to join the freaking WTO. The special exemption from WTO rules that Western countries demanded from China on trade barriers is now been repeatedly used against China in trade dispute.

When you talk about China giving lip service to environmental issues, you may want to check out the facts first. When China attempted to control production of coke used in iron production, because it's dirty and emit large amount of Carbon monoxide, European countries made a WTO complaint that China is controlling the production and export. When China attempted to control production of rare earth metals, where the extraction process is very polluting, US joined other countries in making WTO complaint that China is controlling the production and export.

Fact of matter is, nobody in power care about environmental and human right issues. Those are nothing but convenient tools to use to limit China. The moment any Chinese attempts in these areas actually harms Western interest, as in the two examples above, some other rules will be invoked to stop it.
post #34 of 36
I was speaking to a mainland chinese guy, he thinks the stores should be allowed to remain open. He said if the store sells legit stuff it's good but if they are selling fake Apple stuff then people would know and they wouldn't be in business for too long.
post #35 of 36
Quote:
Originally Posted by cloudgazer View Post

First off carriers can't brick the phone, all they can do is terminate the SIM - easy enough to switch SIMs. Second, do you think that Chinese dissidents would be in a better position if companies weren't willing to sell mobile phones in China because the Chinese government might try to brick them? Really?

Presumably you'd like to see western sanctions against China, given how well that's worked against Cuba? Sorry but it seems very hard to believe you're motivated by concern for the Chinese people.

My point was less about the technology and more about the idea that Apple shouldn't be doing business in China at all. I know it's idealistic to think the US could avoid all trade with the world's largest country, or that anyone except the Chinese could change the political scene. That doesn't mean I have to like it; ergo my opinion that Apple, Google, and other companies deserve what they get for operating there.

You're quite right about sanctions--they don't work. But unless I'm missing something, WTO entry opened a lot of doors for Chinese exports. IMO China's economic rise has prolonged its repressive regime by keeping more people "fat" and happy. That repression may be inevitable, but that's really dispiriting to consider.

And you're also right that concern for the Chinese isn't my prime mover. I am equally if not more concerned by China's rising pollution and resource consumption. Clearly the US has a ton of its own problems on these fronts; if China and India get infected with similar lifestyle obsessions, the implications ain't great.
post #36 of 36
Quote:
Originally Posted by xsu View Post

Ironically, if you ask an average Chinese, he would say it was the biggest strategic mistake of China to join the freaking WTO. The special exemption from WTO rules that Western countries demanded from China on trade barriers is now been repeatedly used against China in trade dispute.

When you talk about China giving lip service to environmental issues, you may want to check out the facts first. When China attempted to control production of coke used in iron production, because it's dirty and emit large amount of Carbon monoxide, European countries made a WTO complaint that China is controlling the production and export. When China attempted to control production of rare earth metals, where the extraction process is very polluting, US joined other countries in making WTO complaint that China is controlling the production and export.

That strikes me as a self-serving, after-the fact, slightly paranoid interpretation. I don't see how China could gripe about WTO rules when it worked so hard to get into the organization. As for environmental issues, steel production is hardly the whole story. The examples you cite don't ring true given the country's massive coal burn rate.
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