Scalpers scalded by gray market iPhones

Prices of smuggled iPhone 6 and iPhone 6 Plus units plunged in Beijing as Apple Inc and its Chinese partners prepare to deliver authorized handsets on Friday.

Many local scalpers' attempt to profit from the month-long availability delay on the Chinese mainland has proven to be a disastrous investment.

In Zhongguancun, the largest smartphone marketplace in Beijing, dealers are obviously finding it difficult to find buyers for the unsold iPhone 6 and Plus models.

"I haven't sold a single model since last week," said Wang Qiang, a shop owner at Top Electronics City in Zhongguancun.

"If you could not sell all the items before the National Day holiday, then you are pretty much in bad shape," said Wang, who has four iPhone 6 and one 6 Plus units in hand.

The black market price for the entry-level iPhone 6 reached 10,000 yuan ($1,633) when Apple first rolled out its latest flagship gadget on Sept 19. The amount was enough to buy two 16-gigabyte iPhone 6 Plus in the United States.

Now, smartphone dealers are selling their leftovers at the official price, which is 5,288 yuan for the 16 GB iPhone 6 and 6,088 yuan for 16 GB iPhone 6 Plus.

Most of the iPhones selling in Zhongguancun were smuggled from Hong Kong or the US, where retail prices were among the lowest.

According to Wang, he will lose 3,000 to 5,000 yuan on each iPhone 6 if it is sold at the official price.

Dealers who got supplies in September were the biggest winners, but it turned out to be risky business for late comers, Wang said.

"It's a 'go big' or 'go home' kind of deal," he said.

The freezing iPhone sales in parallel markets do not mean that Chinese buyers are not in favor of Apple's "bigger than bigger" product. On the contrary, online pre-orders for both models from official channels have been sizzling.

Data from shopping website JD.com showed it has received more than 10 million online orders as of Thursday. Technology website qq.com also estimated total orders for Apple's two smartphone models had exceeded 20 million.

The Big Three telecom carriers refused to disclose the pre-order statistics on Thursday. Though not all the pre-orders will culminate in actual purchases of the device, the official launch is set to lift Apple's share in the smartphone market on the Chinese mainland.

Xu Hao, an analyst with Beijing-based consultancy Analysys International, said Apple's close ties with Chinese telecom carriers will help it quickly expand sales in the first couple of months.

"Private dealers will have no room to negotiate the price with buyers because the supply of the authorized products seems more than sufficient," Xu said.

The iPhone will become a niche player in the Chinese market in the long run as local vendors such as Xiaomi Corp, Huawei Technologies Co Ltd and Lenovo Group Ltd are fast catching up and making inroads into the territory previously held by Apple and Samsung Electronics Co, said experts.

Apple is the sixth-largest smartphone brand in the country by quarterly shipments. Its 6.3 percent second- quarter market share was overshadowed by Xiaomi and Lenovo, who enjoyed double-digit shares, according to Analysys International.

Xiang Ligang, an independent telecom researcher, said the iPhone 6 family will be a "very high-end" smartphone in China in terms of price.

"Only a few Chinese buyers are ready to spend more than 6,000 yuan on such models compared to the smartphone adoption rate in the country," Xiang said. "In smaller cities, the iPhone 6 would continue to be a preserve of the rich," he said.

Private dealers will have no room to negotiate the price with buyers because the supply of the authorized products seems more than sufficient."