(5 votes, average: 8 out of 10)
Loading ...The price is not right for Apple iPhone
The news out of San Francisco that Apple and Rogers will release the iPhone 3G in Canada on July 11th will be welcomed by the many Mac faithful who have been waiting for a long time to get their hands on this device.
The other bit of news from Apple is that they are slashing prices on the iPhone. While this is good news for consumers who always want to save a buck, I am puzzled why Apple is doing this. The iPhone was an expensive device, but people were willing to pay for it. Some people lined up for hours to drop hundreds on the product. Others drove for hours to the U.S. to purchase an iPhone and then unlock it.
I was in Taiwan recently and I heard similar stories from many Europeans who traveled to the U.S. and purchased an iPhone no matter what the cost.
A recent Gartner report has the iPhone second to Blackberry in sales in the U.S. Even thoughApple is new to this market. Slashing prices only leads to other vendors slashing prices and therefore margins eroding, which isn’t a good thing for the channel who like to keep average selling prices stable.
Apple also has cut deals with carriers on subsidies that has lead to this price cut.
This price cut could also be a play for Apple to really compete in the enteprise space where the RIM Blackberry rules.
But, again the need for a price chop isn’t necessary because Apple has a lot going for it. For example, companies are allowing its employees to choose their own smart phones. Many will choose the iPhone because pop-culture says its cool. Apple’s 3G iPhone has plenty of features people will want such as GPS. Apple is also building more enterprise functionality such as Exchange e-mail into the new iPhone.
By making the iPhone available in 70 new countries it can be used by the Global 2000 corporations now.
Other Far East competitors such as Gigabyte are increasing their prices, while offering many more features to maintain margins and average selling prices. RIM has also always maintain its average selling prices.
The other question that still needs to by answered is how will Apple cover all of the regions in Canada. The company only has a handful of Apple stores and will more than likely have to rely on its Mac dealers to help out. But, that announcement was not made today during the company’s annual Worldwide Developers Conference in San Francisco.
We shall see if Apple’s price slash tactic works, but even if it does it will pose a challenge to resellers who are building solutions around the iPhone.
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June 10th, 2008 at 11:22 am
Wouldn’t the iPhone also be available at Fido and Rogers stores like it’s been with AT&T in the US&A? I’ll forego the post-purchase rockstar treatment if I can also avoid the pre-purchase lineups!
June 10th, 2008 at 12:26 pm
Apple ended it’s revenue sharing deal with AT&T, but AT&T are subsidizing the phone so Apple still makes big bucks on each device, ie. more than $199.
June 11th, 2008 at 10:43 am
Rogers website does show July 11 for iphone intro. No more details than that. Once the data plans are in place, Rogers could pre-book? Does this not make sense??
Canadian pricing for the Iphone has not been released ($199 ??) and any subsidy??
A waiting game. An opportunity for Rogers to splash this event canada wide.
Azim
June 11th, 2008 at 1:52 pm
Poorly researched article.
As one of the other comments mentions, AT&T will pay Apple more than the $199.
Also, Apple is opening a whole iPhone/iTouch marketplace where they make 30% of all the sales. The more hands they get their devices into the more games/apps/music they can sell.
Price was cited as the #1 reason why interested buyers were not purchasing. So, they just hid the cost from the end consumer by having it subsidized by AT&T.
It was a smart marketing move without — as you claim — cutting into their profits.
June 11th, 2008 at 3:33 pm
I am with the writer. I don’t believe they would have had to lower the price. I don’t like hidden fee’s, which much rather have an upfront cost.
Those plans are going to be soooo expensive.
June 12th, 2008 at 10:12 am
Rogers current data plan are very expensive. I looked into last night. I do not own a Rogers plan.
If subsidying the Iphone and pricing out the plans too expensive, Rogers will lose.
June 16th, 2008 at 2:28 pm
I am responding to Paul who said my blog was poorly researched. I do not like to do this because I believe this is an interactive forum for readers and should be left that way. I wanted to point out that I did mention the subsidies in the fifth paragragh.
Thank you all for commenting. I do appreciate it.
Paolo
June 19th, 2008 at 7:54 pm
Apple’s plan to use lower prices is an extemely aggressive marketing move into the enterprise space that is currently dominated by RIM.
The $200 entrypoint makes them affordable for any Fortune 2000 company and will ensure fast effective penetration into that space and capture a substantial share.
Is Apple sacrificing anything? Not at all. The iPhone 3G is not a loss leader. At $200 Apple is making a gross profit of about %50. (See enclosed CNN article http://apple20.blogs.fortune.cnn.com/2008/06/14/early-teardown-iphone-3g-could-cost-apple-as-little-as-100/margins made )
Add the potential subsidies paid by the carriers which can reach the hundreds of dollars (http://apple20.blogs.fortune.cnn.com/2008/06/19/what-att-pays-apple-for-the-iphone/ ) and add that the R&D was funded by the margins made on the 1st generation iPhone on an existing platform (iPhone 3G is not an entirely new phone but an incremental to the existing model) Apple’s iPhone 2.0 will be one of the most uccessful financial and marketing product launches ever.
June 30th, 2008 at 4:07 pm
If the cost is being subsidized, then it’s not really a price cut is it? It may appear so, but it’s not.
Still, even if it was, lower price means more users. More users means more developers. More developers means more software, more software means more users, more users means lower price…
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August 19th, 2008 at 1:23 am
Though Apple is new compared to Blackberry it will beat blackberry’s market in near future…
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