I should have clarified: I really meant weak demand signal for the 5C (Walmart's 'discount' is 20% for the 5C versus 5% for the 5S).
It could be that Walmart thought (as I do) that there isn't enough price differentiation between the 2 models and wanted to make sure they moved the 5C.
It's also a perfect opportunity to draw in some customers that might not otherwise shop at Walmart.
This tells me one thing: The 5C has major price flexability. Apple margins must be massive on this phone at $550.
I really think the unlocked price of the 5C is inflated. I fully expect to see more of these 'deals' especially in China/India.
Not sure why it tells you that. Like is often the case, the carrier is subsidizing these types of discounts through two year contracts, not Apple. Otherwise, you would see a discounted unlocked price for carriers like Tmobile.
It could be that Walmart thought (as I do) that there isn't enough price differentiation between the 2 models and wanted to make sure they moved the 5C.
It's also a perfect opportunity to draw in some customers that might not otherwise shop at Walmart.
That's possible too, as is my hypothesis.
I am predicting that, by Christmas shopping time, Apple's 'official' price of the 5C will be lowered to $0/$99 w/contract for 16GB/32GB. (Nothing would make me happier if I was proved wrong on all of these fronts).
This tells me one thing: The 5C has major price flexability. Apple margins must be massive on this phone at $550.
It tells you absolutely nothing about Apple's margins. WALMART is discounting the phone, not Apple. And Walmart has a long history of offering loss-leaders and/or reducing margins on items to get people into their stores.
It could be that Walmart thought (as I do) that there isn't enough price differentiation between the 2 models and wanted to make sure they moved the 5C.
It's also a perfect opportunity to draw in some customers that might not otherwise shop at Walmart.
That's possible too, as is my hypothesis.
I am predicting that, by Christmas shopping time, Apple's 'official' price of the 5C will be lowered to $0/$99 w/contract for 16GB/32GB. (Nothing would make me happier if I was proved wrong on all of these fronts).
I don't think that Apple, the manufacturer, will need to set the 5C prices lower.
The resellers are setting a lower "street" price by lowering their markup/margins.
I think that Apple, the reseller, will approximate the "street" prices (at their option) to remain competitive.
Paraphrasing a prior post:
"Now the "normal" price for a contract phone is $99 instead of $199."
And, a new assertion:
Now, the "street" price for a contract phone is $79 instead of $199.
I am predicting that, by Christmas shopping time, Apple's 'official' price of the 5C will be lowered to $0/$99 w/contract for 16GB/32GB. (Nothing would make me happier if I was proved wrong on all of these fronts).
Ouch!
Well, I have to say that I am on the fence about the 5C... tilting towards soft sales.
Like you, I don't wish ill towards Apple and hope I am wrong.
It could be that Walmart thought (as I do) that there isn't enough price differentiation between the 2 models and wanted to make sure they moved the 5C.
Or, it could simply be that Walmart expect the 5C to be a huge seller and often discounts hot items.
The 5C is already half the price of the 5S (in Walmart), so I don't think the price difference is the issue.
I don't think it signals that at all. It signals that WalMart wants a piece of the early-adopter action and the only way to get that is to discount. Who else in their right mind would buy from WalMart rather than an Apple Store or online?
And what exactly do you expect to learn early tomorrow?
Walmart don't want to sell you an iPhone they want to sell you an iPhone + plan + accessories + warranty.
The 5C is already half the price of the 5S (in Walmart), so I don't think the price difference is the issue.
Hahahahahaha... oh, sorry. It just sounded funny.
I think if we were talking about $1000/$500, that might be huge... but we're talking $199/$99. At Walmart that might be huge... but in reality... it aint... considering what you get for the difference.
Exactly. Walmart is quick to offer discounts on things that look like they're going to be popular - it gets people into their store.
And given that the average iPhone customer is wealthier and better educated than the average Android customer, there's even greater value for Walmart in getting iPhone customers into the store. They are likely not to be your typical Walmart customer, so it increases the customer base.
I always get my iPhones at Walmart not really even because of the discounted price, but they always seem to have them in stock release day with no line. Selfishly- Sad to see this publicity.
If you have ever purchased a phone from Wal-Mart you'd know its worth an extra $10 bucks to buy it somewhere else. They are clueless and a pain to deal with.
It tells you absolutely nothing about Apple's margins. WALMART is discounting the phone, not Apple. And Walmart has a long history of offering loss-leaders and/or reducing margins on items to get people into their stores.
The same type of people who upgraded from the 4S to the 5? Plus the ones (typically younger audience) who prefer the colors?
i.e., many millions of people.
Yes, all those 4s contracts running out or at the least into the subsidy zone. Plus all the people who live where the 5c radio gives them better speed than the 4/4s.
Yeah, "Sounds like a race to the bottom. Very unApple." was my first reaction too.
But Apple isn't participating in the race -- the resellers are!
Apple, the manufacturer still gets the same margin.
Apple, the reseller, may slightly lower selling price to be competitive... but they still pay Apple, the manufacturer the full wholesale price.
But, if you step back a bit -- we may be at the beginning of a drastic change in the way phones are sold and subsidized,
The resellers want their piece of the sercive contract. Even at a reduced margin for the phone. Makes sense, the contract is a bigger cost than the hardware by far.
Comments
I should have clarified: I really meant weak demand signal for the 5C (Walmart's 'discount' is 20% for the 5C versus 5% for the 5S).
It could be that Walmart thought (as I do) that there isn't enough price differentiation between the 2 models and wanted to make sure they moved the 5C.
It's also a perfect opportunity to draw in some customers that might not otherwise shop at Walmart.
Not sure why it tells you that. Like is often the case, the carrier is subsidizing these types of discounts through two year contracts, not Apple. Otherwise, you would see a discounted unlocked price for carriers like Tmobile.
It could be that Walmart thought (as I do) that there isn't enough price differentiation between the 2 models and wanted to make sure they moved the 5C.
It's also a perfect opportunity to draw in some customers that might not otherwise shop at Walmart.
That's possible too, as is my hypothesis.
I am predicting that, by Christmas shopping time, Apple's 'official' price of the 5C will be lowered to $0/$99 w/contract for 16GB/32GB. (Nothing would make me happier if I was proved wrong on all of these fronts).
Yes!
Likely, Wal-mart buys the $99/$549 iPhone 5C from Apple for $400, net 30 days -- and is reimbursed by the carriers for selling contracts.
I don't know anything about the carrier deals with other resellers like Wal-mart.
But, I do understand Wal-mart's pricing/profit structure -- They could sell an unlocked $549 5C for $450 and be well within their objectives.
But @jragosta is correct -- Apple's margins selling to resellers remains unaffected!
I don't think that Apple, the manufacturer, will need to set the 5C prices lower.
The resellers are setting a lower "street" price by lowering their markup/margins.
I think that Apple, the reseller, will approximate the "street" prices (at their option) to remain competitive.
Paraphrasing a prior post:
"Now the "normal" price for a contract phone is $99 instead of $199."
And, a new assertion:
Now, the "street" price for a contract phone is $79 instead of $199.
Originally Posted by anantksundaram
I am predicting that, by Christmas shopping time, Apple's 'official' price of the 5C will be lowered to $0/$99 w/contract for 16GB/32GB. (Nothing would make me happier if I was proved wrong on all of these fronts).
Ouch!
Well, I have to say that I am on the fence about the 5C... tilting towards soft sales.
Like you, I don't wish ill towards Apple and hope I am wrong.
I don't think that Apple, the manufacturer, will need to set the 5C prices lower.
The resellers are setting a lower "street" price by lowering their markup/margins.
I think that Apple, the reseller, will approximate the "street" prices (at their option) to remain competitive.
Paraphrasing a prior post:
"Now the "normal" price for a contract phone is $99 instead of $199."
And, a new assertion:
Now, the "street" price for a contract phone is $79 instead of $199.
Sounds like a race to the bottom. Very unApple.
Or, it could simply be that Walmart expect the 5C to be a huge seller and often discounts hot items.
The 5C is already half the price of the 5S (in Walmart), so I don't think the price difference is the issue.
As pointed out above, it's NOT Apple. It's Walmart.
If it was Apple, everyone (including the Apple Store) would have a $79 price.
I don't think it signals that at all. It signals that WalMart wants a piece of the early-adopter action and the only way to get that is to discount. Who else in their right mind would buy from WalMart rather than an Apple Store or online?
And what exactly do you expect to learn early tomorrow?
Walmart don't want to sell you an iPhone they want to sell you an iPhone + plan + accessories + warranty.
As pointed out above, it's NOT Apple. It's Walmart.
If it was Apple, everyone (including the Apple Store) would have a $79 price.
I guess you didn't bother to read Dick's comment.
The BOM/MFG costs for the iPhone 5 were $207.
http://www.isuppli.com/Teardowns/News/Pages/iPhone5-Carries-$199-BOM-Virtual-Teardown-Reveals.aspx
I suspect the same costs for the 5C will be In the $180 range.
I don't know what other costs Apple assigns directly to the device -- but let's say it's $20.
So, $180 + $20 == $200 total direct cost of the 5C.
Apple can sell the 5C to resellers for $400.
Apple gross profit per 5C = $400 - $200 == $200 or 50% margin.
And... the resellers can sell the 5C to end users at whatever contract or unlocked price meets [B][I]their[/I][/B] profit objectives.
The 5C is already half the price of the 5S (in Walmart), so I don't think the price difference is the issue.
Hahahahahaha... oh, sorry. It just sounded funny.
I think if we were talking about $1000/$500, that might be huge... but we're talking $199/$99. At Walmart that might be huge... but in reality... it aint... considering what you get for the difference.
I always get my iPhones at Walmart not really even because of the discounted price, but they always seem to have them in stock release day with no line. Selfishly- Sad to see this publicity.
They have. It's always $86 for the previous and $186 for the new.
Yeah, "Sounds like a race to the bottom. Very unApple." was my first reaction too.
But Apple isn't participating in the race -- the resellers are!
Apple, the manufacturer still gets the same margin.
Apple, the reseller, may slightly lower selling price to be competitive... but they still pay Apple, the manufacturer the full wholesale price.
But, if you step back a bit -- we may be at the beginning of a drastic change in the way phones are sold and subsidized,
It tells you absolutely nothing about Apple's margins. WALMART is discounting the phone, not Apple. And Walmart has a long history of offering loss-leaders and/or reducing margins on items to get people into their stores.
The same type of people who upgraded from the 4S to the 5? Plus the ones (typically younger audience) who prefer the colors?
i.e., many millions of people.
Yes, all those 4s contracts running out or at the least into the subsidy zone. Plus all the people who live where the 5c radio gives them better speed than the 4/4s.
Yeah, "Sounds like a race to the bottom. Very unApple." was my first reaction too.
But Apple isn't participating in the race -- the resellers are!
Apple, the manufacturer still gets the same margin.
Apple, the reseller, may slightly lower selling price to be competitive... but they still pay Apple, the manufacturer the full wholesale price.
But, if you step back a bit -- we may be at the beginning of a drastic change in the way phones are sold and subsidized,
The resellers want their piece of the sercive contract. Even at a reduced margin for the phone. Makes sense, the contract is a bigger cost than the hardware by far.