Wal-Mart Takes A Slice Out Of The iPhone's Price
The twain -– Wal-Mart with its heavy discounting and Apple with its premium pricing –- are meeting somewhere on the high end of middle with the mass-market retailer selling the new iPhones for less than Apple itself is. If you’re wondering how they can do that, you’re not alone.
Wal-Mart “announced it will be offering the iPhone 5C starting at $79 ($20 less than the list price) on contract from AT&T, Sprint, or Verizon -– the lowest offer on a current-generation iPhone to date,” Karis Hustad reports in the Christian Science Monitor. “The retailer will also be offering the iPhone 5S starting at $189 (a $10 discount).”
It also is selling the dated iPhone 5 for $79, and the iPhone 4S for 79 cents, with two-year contracts. You can have the iPhone 4 for 10 cents, “plus they’ll throw in a $100 gift card,” Hustad writes. And, reports Engadget’s Jon Fingas, for the contract-adverse “Wal-Mart plans to slash $100 off the prices of Straight Talk’s iPhone 4 and iPhone 5 variants, which will respectively cost $349 and $549 as of Sept. 14.
Businessweek’s Kyle Stock takes a gander at a few possible scenarios
for the bargain-basement rates given “Apple’s typically Jobsian efforts at price control.” He swats down the idea that service providers (e.g., Verizon, AT&T, Sprint) are giving
Wal-Mart a bigger subsidy given the way the business is trending and offers two other possibilities:
1. It “twisted Apple’s arm.” In brief, “Wal-Mart essentially might have said: Look, you need low-income buyers, and we have plenty of those. Knock $20 off each phone for us, and you can lock in the bottom of the buying pyramid while maintaining some of your brand’s luxurious luster,” Stock writes.
2. It “just ignored Apple’s rules.” Apple’s not likely to cut it off and the iPhone, with its already slim margins, makes for an enticing loss leader.
Eli Portnoy, founder and CEO of CultureRanch, tells the Wall Street Journal’s Ian Sherr, Drew FitzGerald and Thomas Gryta that it’s “a huge mistake” for Apple to get into the discounting scrum. And “Apple’s premium image also isn’t helped by the fact that iPhones are increasingly found beyond outlets like Apple’s own stores, with their aura of a hip and high-end lifestyle,” they write.
On the other hand, Gartner analyst Van Baker tells them that Apple has to be more permissive about pricing given the shifting marketplace. “It’s a much more competitive environment now for Apple than it was a few years ago,” he says.
Apple has been mum about the variable pricing developments. Wal-Mart spokeswoman Sarah McKinney has basically been pointing out to reporters that offering cheaper prices is the retailer’s longstanding stock-in-trade. “Because of our size and scale and what we’re able to do, we’re able to provide these prices,” she tells the Los Angeles Times’ Salvador Rodriguez, for example.
Or, as The Consumerist’s Mary Beth Quirk puts it about “Apple’s newest dingledongles”: “In order to make sure customers come a-swarming through its doors on the big day, the retailer is offering a discount on both phones.”
The iPhone 5c, which was widely touted in advance to be Apple’s entrée to the lower end of the smartphone market -- by observers if not explicitly by the company itself -- was roundly criticized for its highish price when it was announced last week (and the stock took a hit as a result).
“Unlocked, the 5c will sell for about $550 — making it still costly in places like China, India and Brazil where more affordable options from Samsung running Google’s Android OS are available,” points out Forbes’ Connie Guglielmo.
“Most first time buyers of sub-$300 smartphones are purchasing Android phones, meaning that it will be increasingly difficult for Apple to migrate those users from the Android ecosystem at a later date than if Apple could have attracted those same users to iOS in the first place,” Sanford C. Bernstein & Co. analyst Toni Sacconaghi says in an earlier Guglielmo round-up of analysts’ reactions to the price.
Has it really come to the point where we are defined by the mobile ecosystem within which we exist?