Walmart Cuts Prices on iPhone 5 Amid Lower Projections
By Adam Dickter / CIO Today. Updated December 19, 2012.
'Tis the season for iPhone savings. Amid lowered projections for Apple's smartphone next year, the nation's leading retailer, Walmart, is offering a major incentive to put one under your tree this week, with a $72 discount on the 16-gigabyte version of the latest model, with a two-year contract or eligible upgrade.
"Nothing is merrier than iPhones on Rollback, just in time for the holidays," Walmart said in a post on its Facebook page this week. The previous price was $189, or ten bucks less than Apple's suggested price. The outdated but still popular iPhone 4S, the first model to include the popular Siri voice activated assistant, is available for a virtual song, $47, down from $87.97.
And that's not all; you can pick up an iPad 3, now displaced by the iPad mini and its larger sibling, for a scant $399, down 100 bucks from the initial price.
Needs New Momentum
We reported last week that analysts see Apple running out of new customers for its most profitable product after six years of amazing sales, possibly because the iPhone 5 is not drastically different enough from the iPhone 4S.
ABI Research sees iPhone sales slowing next year, from 39 million this quarter to 38 million in the first quarter, 36 million for the second quarter and 33 million for the third quarter. ABI's annual estimate for this year is 127 million, which will grow to 160 million iPhones next year.
A report released Tuesday by IHS iSuppli found that Apple archrival Samsung had a slight edge in the smartphone market, 1 percentage point of market share ahead.
"However, entering the 2012 year, Samsung moved decisively ahead of Apple with a wide range of Android smartphone offerings," iSuppli said. "Samsung made significant gains in both the high end as well as the low-cost market with its Galaxy line of smartphones. This diversified market approach has allowed Samsung to address a larger target audience for its phones than Apple's limited premium iPhone line."
Wireless analyst Jeff Kagan sees Apple nearing the crest of the wave it has been riding.
"Companies who are fortunate catch the wave and ride it for years," he told us. "But eventually every wave crests, then falls. A similar thing is happening with Amazon.com with their Kindles at retail stores. In the retail world, shelf space is gold. If they don't see earnings then they make changes.
"Unfortunately, Apple has taken several blows during the last year and I see no sign of things getting better."
Because of its enormous volume of sales, Walmart is in the best position to slash its profit margin on the iPhone 5.
"Walmart has a history of discounting things, even iThings, though this is the steepest discount I've seen," said Avi Greengart, an analyst with Current Analysis. "That makes it a good deal for consumers, but it likely has almost no bearing on Apple's margins.
"Apple isn't selling iPhones to Walmart at a steep discount -- the iPhone is heavily subsidized by carriers, and it isn't clear if Apple is selling the iPhone to Walmart with any discount at all."
Walmart isn't alone in its iPhone sale. RadioShack ran a $20 discount promotion for a limited time ending Dec. 15, and Best Buy, as it struggles to keep up with online competition, is offering $50 off.
Greengart told us this is a sign that the iPhone is such a draw that carriers are willing to heavily subsidize it and then retailers are willing to sacrifice their margins to sell it, "either because a) they have a low margin, high volume business model, b) they want to use the iPhone's popularity to get customers into their stores, or c) all of the above."