1. Wal-Mart Twisted Apple’s Arm This was finally the iPhone iteration in which Apple needed to win lower-income consumers, which is why Apple made an unprecedented effort to roll out a plastic-case version of its new smartphone to fit smaller budgets. The deep-pocketed consumers in the smartphone market have by now already been saturated with products, and Samsung Electronics (005930:KS) has been coming on strong with alternative high-end products. In fact, Apple is getting plenty of criticism for not making the low-end iPhone cheaper still.
Wal-Mart essentially might have said: Look, you need low-income buyers, and we have plenty of those. Knock $20 off each phone for us, and you can lock in the bottom of the buying pyramid while maintaining some of your brand’s luxurious luster.
2) Wal-Mart Just Ignored Apple’s Rules Wal-Mart may have simply decided to forfeit any financial price-setting sweeteners from Apple. It runs on pretty lean margins to begin with and might not mind sacrificing iPhone profit if it is confident it can also sell a case or a screen cover at a 40 percent markup. The giant retailer has a long history of selling hot products below cost to get shoppers in the door. Back in the day, it was discounted CDs and DVDs—now maybe it’s underpriced handsets. And as the No. 1 cellphone seller in the U.S., Wal-Mart probably doesn’t have much reason to worry about Apple cutting off its supply.
Neither company is saying much about how discussions played out. Apple is handling inquiries by referring to its press release. A Wal-Mart spokeswoman, Sarah McKinney, said she was unfamiliar with Apple’s incentives to retailers to keep prices high. Wal-Mart’s lower iPhone price tags, she said, are strictly a Wal-Mart decision.
“Honestly, it’s just our business model,” added McKinney. “We leverage our expenses so we can invest in price.” That seems to suggest Wal-Mart simply ignored Apple’s pricing preferences. Still, McKinney insisted Wal-Mart will make a profit on each iPhone, even at the lower prices.