5c Wobbles in Apple's iPhone Balancing Act

By Richard Adhikari
MacNewsWorld
Part of the ECT News Network
10/16/13 12:16 PM PT

Consumers don't much like the splashy, plastic iPhone 5c. It's arguably too expensive for the Chinese market, at roughly $700 -- but even in the U.S., where it can be had virtually for free with a two-year contract, there are no lines forming. "We are witnessing a failure to meet expectations," said Larry Chiagouris, a marketing professor at Pace University.

Apple has slashed orders to suppliers for the iPhone 5c and parts for the device, The Wall Street Journal reported.

The news comes just three weeks after the 5c debuted at a launch event featuring the iPhone 5s.

Apple claimed 9 million 5c and 5s iPhones were ordered in the first three days following their release Sept. 10, but it declined to break down the figures.

iPhone 5c

The consensus among analysts was that the 5s was outselling the 5c by a considerable margin.

Even in China, where consumers snap up iDevices as status symbols, demand for the 5c was anemic.

"We are witnessing a failure to meet expectations," Larry Chiagouris, a professor of marketing at Pace University's Lubin School of Business, told MacNewsWorld.

Apple has trained consumers "to expect each generation of product to be much greater than the previous generation," he noted.

Going Dirt Cheap

Within a week of the 5c's launch, it was being discounted.

Sprint offered a US$100 discount on any phone -- essentially giving away the 16-GB iPhone 5c, which was listed on its site at $99.

Earlier this month, Best Buy offered a $50 discount on the 5c in the form of a free gift card; and Walmart and Radio Shack slashed the device's price to less than $50.

At launch, Walmart had offered the 5c at $79 with a two-year contract -- $20 off the list price. It later cut the price to $45.

Radio Shack began offering a $50 gift card promotion when Best Buy's ended Oct. 7.

Target began offering a $50 discount on the iPhone 5c earlier this week.

Why the 5c Stumbled

One possible reason the iPhone 5c is faltering could be poor pricing strategy on Apple's part. Its price is too high outside the U.S., where the smartphone market is really strong.

"The 5c is definitely not priced at that magical 2,500-3,000 yuan price point -- that's just under $500 -- which is the sweet spot in China," Wayne Lam, a senior analyst at IHS, told MacNewsWorld. "It came in at roughly $700, which was quite high."

The 5c is "essentially an iPhone 5 and should be priced at that level," Lam continued. "It's hard to say whether or not Apple is insulting the consumer's intelligence."

Apple was "banking on consumer loyalty and customer preference and its association with higher-end products," Lam said. It did not keep the iPhone 5 around because "that would confuse the market and cannibalize 5c sales -- the industrial design of the two is 99 percent the same."

It's Not Over Till It's Over

Despite its poor showing so far, the 5c is not yet on its last legs.

"Proof of the poor performance of the iPhone 5c would only be confirmed when Apple releases earnings on Oct. 28," Ian Fogg, director of mobile analysis at IHS Electronics & Media, told MacNewsWorld.

The two important data points to look for would be the number of iPhones shipped and the average selling price, Fogg said.

"If the ASP has fallen, that would indicate that the iPhone 5c has been fairly popular, as the price point is lower than the range of phones Apple had at this point last year," Fogg explained. "If it stays the same, then it'll likely mean that iPhone 5c sales have disappointed."

The 5c will likely follow the sales trajectory of other previous-year iPhones, or "n-1 phones," as they're known, suggested Michael Morgan, a senior analyst at ABI Research.

"N-1 phones launch with 25 percent of all shipments and decrease to 15 percent and then 5 percent as we move forward," Morgan told MacNewsWorld. "This has happened every time over the past five years, and the iPhone 5c is selling about 25 percent of shipments now."

Overall, Apple's reduction in orders for the iPhone 5c and 5c parts "doesn't say much of anything about the overall performance of the new models," IHS' Lam suggested. "It's just a matter of balancing the SKUs and the volume load between the 5c and 5s."

Source: http://www.technewsworld.com/rsstory/79205.html
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