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Apple discounts iPhone 5C 8%-9% in five markets via storage cuts

Gregg Keizer | March 19, 2014
Reaction to poor sales, eroding share and fierce competition from below

Thompson saw today's 8GB iPhone 5C pricing as Apple continuing its premium brand drive. "Apple is cognizant of the effect discounting can have on a brand, and storage gives them a way to lower prices without discounting," Thompson said in an email today.

Gold thought differently. "There is a lot of lower-priced competition, particularly in less-developed markets, which is significant. Apple's come to the realization that it cannot always demand premium pricing. It's not immune to pricing pressure, despite what some people think."

Apple's move comes as competitors, especially a host of Android-powered phones, erode the iPhone's sales share from the low end. According to Kantar Worldpanel CommTech, in China Android held an 81% sales share for the fourth quarter of 2013, up 6 percentage points, while Apple's iOS share was 17%, down nearly 5 points. iOS was down 3 percentage points in France, down 6 points in Germany, and flat in the U.K.

Others scoffed at Apple's pricing, arguing that an 8GB iPhone 5C was worthless, that there is too little storage space available to make the smartphone useful.

Gold countered. "At the lower end of the smartphone market, most people aren't coming close to filling up 8GB," he said, pointing out that that was plenty of space for apps, although not enough for heavy video recording or viewing. "I don't think that's going to be a stumbling block."

By choosing only five markets -- Australia, China, France, Germany and the U.K. -- Apple tipped its hand about those it believed were most likely to need pricing help, and those that would react best to price cuts. "Apple's very good at knowing how to price things, identifying the markets with the most pressure, whether they are the most competitive markets, the ones where Apple has the lowest market share, or both," said Gold. "These are the markets that Apple wants to stay competitive in."

The 8GB iPhone 5C is available for ordering today from the Apple online stores in the five markets, with estimated ship times within 24 hours.

 

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