Apple has carefully cultivated an image of a premium product. For practical purposes, much cheaper Google Android and Microsoft Windows Phones such as those from Nokia have caught up with Apple in functionality and specifications.
Until now Apple has had an edge in spite of higher prices of its products because of its premium image. This edge has allowed Apple to generate higher gross margins than the competitors.
Traditionally it has been unprecedented for brand new Apple products to be discounted, even though older products have experienced discounts. Now the world’s largest retailer, Wal-Mart, has torn down Apple’s premium image. Wal-Mart is heavily discounting the latest Apple products.
Wal-Mart is selling the 16 GB Apple iPhone 5 for $127. AT&T‘s price is at $199. Wal-Mart is discounting the 16 GB iPhone 4S for $47, compared to a typical price of $99. Traditionally Wal-Mart has discounted these phones by only $10.
Wal-Mart is also selling iPads starting at $399 compared to $499 and Wal-Mart is also throwing in a $30 iTunes card.
This time these discounts are available only for 30 days. The surprise is that Wal-Mart has arranged these discounts in cooperation with Apple. This arrangement makes sense for Wal-Mart as its rivalry with Amazon heats up. The big question is, ‘Why would Apple cooperate to demote its products from their premium status to a pedestrian product status?’
Only Apple knows the answer. One inference is that this is a desperation move on the part of Apple.
Astute investors have noticed and appear to be making a negative inference as reflected by the price action in Apple stock. Apple is down as of this writing in spite of good news on iPhone 5 sales data from China…Read more at Forbes
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