Why Chinese retailers cut iPhone prices

Stores are trying to move the phone, but buyers are looking elsewhere. Will Apple be forced into a price compromise?

By 247 Wall St. Sep 26, 2013 3:14PM

Apple Senior Vice President of Worldwide Marketing at Phil Schiller speaks about the new iPhone 5C (© Justin Sullivan/Getty Images)By Paul Ausick, 24/7 Wall St.

 

When Apple (AAPL) announced its new iPhone 5s and 5c a couple of weeks ago, China was one of the countries included in the initial launch rollout. A basic unlocked iPhone 5c cost about $733 in China, compared with U.S. list price of $549.

 

A unlocked gold iPhone 5s was selling for as much as $1,634 in China. Yet the 5s reportedly outsold the 5c by 9-to-1 margin. Of the new iPhones sold over the first weekend, the 5c reportedly managed to grab just 9% of sales. The list price for an iPhone 5s in the U.S. is $649.

 

According to Caijing, retailers cut the price of the 5c in China to around $650 at launch and have cut the price further to about $604 in an effort to move the phone that few people apparently want.

 

Did Apple foul up on pricing here? The 5c is essentially the iPhone 5 with a plastic case in a choice of five colors. But its price is just $100 lower than the top-of-the-line 5s. The argument about this pricing strategy rages, but clearly customers have voted with their wallets.

 

Apple's problem is that these early buyers are the ones who can afford to pay for a 5s. There are plenty of them, but there are many more who will look elsewhere for a smartphone. Both new iPhones are too expensive for them.

 

Should or will Apple lower the price on the 5c? Yes, Apple should cut the price, if it is serious about addressing the large economy-minded market. But the company does not appear to be serious about that, so it likely will not cut the 5c's price. Like the Cubs, maybe next year.

 

Shares of Apple traded up less than 1% Thursday afternoon to $484.41 in a 52-week range of $385.10 to $682.17.

 

More from 24/7 Wall  St.

 

Tags: AAPL
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