The Demographic Drivers

In March, India overtook China as the world’s most populous country. However, it’s not just the sheer numbers that matter; the structure of the population is crucial as well. China’s demographic pyramid, coupled with lower retirement ages, presents a potential crisis, which might push companies to seek growth opportunities abroad.

The Japanese tech industry may also follow suit, spurred by their country’s population decline. Japan lost 644,000 people in 2022 alone, and this trend is projected to continue, with the population forecasted to shrink to 88 million by 2065, a 30% decline in 45 years. As a result, the need for overseas expansion will be increasingly critical.

The Economic Rationale

The economic factors further reinforce the argument for internationalisation and its impact on apps: China’s slower than expected growth rate of 2.2% in 2022 due to Covid lockdowns. Thus, as domestic economic growth slows, companies will be incentivised to explore foreign markets to avoid stagnation.

For many Chinese companies, this is uncharted territory, but they do have role models to look up to. Bytedance’s TikTok has shown how a Chinese company can conquer the West. Its monumental success could well be a blueprint for other Chinese tech firms looking to expand internationally.

Western Companies: The Flip Side of the Coin

Western companies, too, are not immune to these challenges. As they face similar demographic and economic pressures, we can expect to see them making moves to enter Asian markets.

Furthermore, western companies and governments may intensify their efforts to pressurise Chinese officials to open up their markets. A successful expansion of Chinese businesses abroad might compel officials to reciprocate, thus allowing Western companies to gain a stronger foothold in China.

Understated Success Stories

While we may not see another TikTok-like success that steals the PR spotlight, we should not underestimate the smaller triumphs. In the quiet corners of the tech industry, many companies are making inroads into foreign markets. These could be game developers, crypto projects, or other tech-based ventures that are quietly succeeding on each other’s turf.

The Challenges of Launching Apps in China

While the tech industry is geared up for an era of internationalisation, launching apps in the Chinese market poses unique challenges. One of these hurdles is the highly fragmented app store market in China.

Unlike in the West, where Google’s Play Store and Apple’s App Store dominate, China has a plethora of Android app stores vying for users’ attention. Giants like Tencent, Baidu, and Huawei each operate their own stores, and the Google Play Store holds a negligible market share. This fragmentation means that to reach a broad user base, apps need to be listed on multiple platforms, which can increase operational complexity and cost.

Another significant barrier for foreign companies trying to launch apps in China is the country’s stringent licensing requirements. Chinese authorities require companies to obtain licenses before their apps can be approved on app stores or before they can engage in advertising activities. The licensing process can be cumbersome and time-consuming, especially for foreign companies unfamiliar with the local regulatory environment.

Moreover, the licenses are not just a one-time requirement; they need to be maintained and renewed, adding to the ongoing operational expenses. This can deter smaller companies or start-ups with limited resources from attempting to enter the Chinese market.

Notwithstanding these challenges, the potential rewards of succeeding in the Chinese market are enormous, given its vast user base and increasing digital consumption. As such, while the road to launching apps in China may be fraught with challenges, for many tech companies, it’s a journey worth undertaking. It will, however, require meticulous planning, a thorough understanding of the regulatory landscape, and a willingness to adapt to a unique digital ecosystem.

The Challenges Ahead

However, this path is not without its challenges. The political tensions between China and the US might make it difficult for Chinese companies to establish themselves in the West. To overcome this, they’ll need to invest in lobbying efforts and strive to appear less connected to the Chinese government.

We believe the tech industry is on the cusp of a transformative period of internationalisation in the next years, driven by a confluence of demographic and economic factors. This shift may lead to a more globalised tech landscape, where East meets West, and vice versa. However, this journey will not be without its hurdles, and it will be fascinating to watch how these trends play out.

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When it comes to Android, Samsung has the advantage of being the top smartphone manufacturer and being able to heavily promote its own app store, the Galaxy Store. However, despite these advantages, the Galaxy Store remains a failure compared to the Google Play Store. This shows that even with the backing of a major device manufacturer, alternative app stores struggle to gain traction.

One of the biggest challenges for alternative app stores will be changing the habits of iPhone and iPad users. Since the launch of the App Store, these users have become accustomed to using it for their app needs. This means that alternative app stores will have to work hard to convince users to switch from the App Store and start using their platforms instead. This is no easy task, as people are often resistant to change and may be hesitant to try out a new app store.

Another factor that will make it difficult for alternative app stores to succeed is the fact that Apple has strict control over its app ecosystem. This means that any app that is available on the App Store must go through a rigorous review process before it is approved for download. This ensures that the apps available on the App Store are of high quality and do not contain any malicious software.

In response to this concern, it is worth noting that Apple may require alternative app stores to follow similar reviewing processes. This could make it more difficult for alternative app stores to operate, as they would have to invest in a reviewing system and ensure that all apps on their platform meet the same high standards as those on the App Store.

Furthermore, Apple may also require alternative app stores to use its payment system, which could add additional costs and hurdles for these app stores to overcome. All of these factors could make it more challenging for alternative app stores to succeed, even if they are able to offer a wider selection of apps than the App Store.

There are two areas where I see these alternative app stores succeeding: the first is in the case of game launchers like Steam or Epic. These platforms are already popular, and their offering of cheaper games or subscription services could have mass appeal. The recent legal battle between Epic and Apple over the App Store’s monopoly on in-app payments has brought the issue of alternative app stores to the forefront, and combined with this recent EU ruling, it is possible that this could pave the way for more game launchers to enter the market.

Furthermore, game launchers like Steam and Epic already have a large user base and a strong brand recognition, which could make it easier for them to convince users to switch to their app stores. In addition, the wide selection of games available on these platforms could be a major draw for users, as they would be able to access a wider range of games at potentially lower prices than on the App Store. All of these factors make the gaming market a ripe opportunity for alternative app stores to succeed.

The second area where alternative app stores could potentially succeed is in the case of China, where there are already a multitude of app stores for Android devices. The high brand recognition of these app stores in China would help Chinese iPhone users quickly adapt to using app eventual stores like the Huawei App Market and the Oppo Software Store shall they launch on iOS.

However, the use of alternative app stores in China may also be influenced by geo-political issues between the US and China. In the past, the Chinese government has taken steps to block the use of the Google Play Store. It is possible that in the future, the Chinese government may encourage the use of alternative app stores made in China or simply block the App Store.

Additionally, for nationalistic reasons, Chinese iPhone users may prefer to use alternative app stores made in China rather than the App Store. This could provide a boost to these app stores and help them gain a larger share of the market. Overall, the combination of high brand recognition and potential government support or user preference for domestic app stores could make the Chinese market a promising opportunity for alternative app stores.

As of now, only the EU is forcing Apple to allow alternative app stores and given the aforementioned challenges to adoption and running of these stores, it is likely that these alternative app stores will see limited success. However, if countries like the US and China follow suit and also force Apple to allow alternative app stores, we could see big changes in the app landscape in the next two years. The success of alternative app stores in the gaming and Chinese markets will be particularly interesting to watch.

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