Early morning visitors to Apple stores in New York City are often greeted by an interesting sight: a line of Asian folks, usually Chinese, of all ages and persuasions. Why are they there? To make a quick buck buying a Chinese-made product and smuggling it back to China.
The New York Times has an interesting write-up of the smuggling rings and how, in one morning, a person can make a nice chunk of change and take the week off. The iPhone 4 particularly has become something of a luxury item back in China, and people will pay upwards of $1,000 to get one.
In a nutshell, Apple allows folks to buy two phones a person, max. The people looking to fence them buy one or two contractless iPhone 4s for $600 apiece — cash works best — and then turn around and sell them to stores that'll cart them back to China for $750, walking away with $300 in their pocket.
With the iPhone 4 landing in China this weekend, Apple has been trying to discourage such practices. However, that's pretty tricky business: just because someone looks Chinese or speaks in broken English doesn't mean they should be treated like a smuggler.
That said, the smuggling won't necessarily stop once the iPhone 4 comes out, and maybe it won't even hurt it. "Apple knows exactly how much these products are selling for on the black market in China, and the company will price its products accordingly," Professor Shang-Jin Wei, a director at Columbia Business School, said. "Limiting the sale of the iPhone until now in China is likely part of a bigger corporate strategy to make it a luxury product that people will pay higher prices for."