Last week, we reported on long return lines at Apple's 5th Avenue retail store filled with Chinese iPad resellers. Resellers try to buy up as many iPads as possible on launch day to quickly turn around and sell them for a profit. According to our report many of these resellers were returning their iPads with some individuals returning up to 30 devices at one time. We speculated the reason for the returns was due to a an adequate launch supply of new iPads by Apple.
Reuters dug deeper and found that these resellers are having trouble making a profit on Apple's most recent launch, despite a healthy demand for the product in China.
Reuters reports that some of the new pressure comes from Chinese custom authorities which have told shipping companies to stop accepting iPad shipment orders. Meanwhile, the iPad has been added to a list of taxable items entering China. The end result has been much tighter margins than in the past.
An electronics dealer in Oakland, California, said he struggled to break even this year, a far cry from previous iPad releases when he shipped upwards of 1,000 tablets and pocketed profits of $50 to $100 per device sent to his buyer in Hong Kong.
The other major factor seems to be an abundance of supply and a simultaneous launch in 10 countries including Hong Kong. As a result, black market prices for the new iPad in China has been falling.
One dealer even said "This whole game is over", due to the overabundance of supply, describing the market as "flooded".
