Why Walmart's $127 iPhone 5 Is Bad For Apple

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On Friday Walmart announced that it was cutting the price of the iPhone 5 to $127 for the next thirty days.

This was an unusual move. Apple typically prevents stores from making drastic price cuts this early in a new iPhone's life cycle.

While people like John Gruber want to say this isn't a big deal for Apple because it's still going to collect $650 for each phone Walmart sells, we disagree.

There are two reasons this sort of discount is bad for Apple:

  • It creates an air of uncertainty around iPhone pricing. If you just bought an iPhone 5 for $200, you're probably annoyed. You could have gotten a big discount. The next time you buy an iPhone, you might wait, hoping a discount is coming in a few months.
  • The discounted iPhones are impossible to find. Philip Elmer DeWitt and Tricia Duryee can't find any Walmart that actually has the $127 iPhone 5 in stock. So, some consumers might push off their iPhone purchase while they hunt Walmarts for the phone.

In the big picture, these aren't that bad. Apple isn't going to close up shop, or get totally hosed because of this discount. But, these discounts aren't that great, either.

There's more downside than upside to selling a limited amount of iPhones at discount. It creates a perception that the iPhone's price will be chopped if you're patient.

Don't Miss: THE TRUTH ABOUT APPLE: The iPhone Was A Once-In-A-Lifetime Opportunity

 

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