iPhone 5s Greatly Outselling 5c. Not a Surprise

| Analysis

One might have expected the iPhone 5c, thanks to its lower price to outsell the iPhone 5s. But there are other factors at play, and this is, in fact, not a great surprise.

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Sales data obtained by AllThingsD from Consumer Intelligence Research Partners (CIRP) show that, during the last days of September, 64 percent of Apple's iPhone sales were iPhone 5s, 27 percent iPhone 5c, and 9 percent iPhone 4s.

This may have been surprising to some. Does it represent a failure of the iPhone 5c? Should a less expensive iPhone automatically outsell a more expensive one? Those observers and investors who wanted to manipulate Apple into gaining market share against Android with a cheaper iPhone 5c will probably point to this data as evidence of Apple's iPhone 5c failure.

I don't believe that, and here's why.

There are a lot of U.S. Apple customers out there hungry for the latest and greatest. They've been hungry for the new 5s colors, especially gold. They're intrigued by the better camera and Touch ID (fingerprint recognition). They know the 5c is just an iPhone 5 in a colorful, polycarbonate case. The demand for the standard iPhone 5 technology in the U.S. has been sated. So one would expect, in the early days, for the aggressive, high tech buyers to prefer the iPhone 5s. So far, Apple hasn't been able to meet demand, and the waiting time is still two to three weeks.

Then why all the TV ads for the iPhone 5c? Desperation? Not really. There's no point trying to create demand for a product that can't be delivered right away. It's sensible to create demand for a product that's in ready supply, the 5c. That may sound simplistic, but Apple's ads tend to achieve the desired effect or Apple wouldn't run them.

Over time, as Apple catches up with demand for the 5s, and other customers, especially those outside of the U.S., see a value proposition in the colorful iPhone 5c, I expect the percentage of 5c sales to rise. Apple has the liberty to adjust the pricing to nudge that along. Apple's strategy is working nicely.

At this point, any suggestion that the 5c has been a failure just doesn't take into account the market dynamics at this early phase of the product rollouts.

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Gold iPhone 5s image via Apple.

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6 Comments Leave Your Own

geoduck

I read elsewhere that the 5C portion of sales is about the same as the 4S’s portion was a year ago when when it was the ‘budget’ model and the 5 was the top of the line.

brettdog

I think you hit the nail on the head, geoduck.
You shouldn’t compare 5C to 5S.
But compare 5C to 4S when 5 was launched.

bdog

wab95

John:

The concept that Apple needed to make a ‘cheap’ iPhone was always based on flawed reasoning, and bespoke a misapprehension of Apple’s business model, a topic frequently discussed, thankfully, at TMO Towers. This is not what Apple did, in any case, with the iPhone 5c, which is why the Street punished Apple after they announced the pricing of the 5c.

This concept that market share is a goal unto itself is, in my view, an anachronism,ma holdover, if you will from the PC era, and one that analysts and pundits want to graft, without a compatibility check, onto the post PC era. This remains, insofar as I can tell, a performance indicator of success unique to the computer tech industry and its related support systems.

World over, people recognise that Apple is a premium brand. That is part of its lustre and desirability. A cheap iPhone, apart from being an oxymoron, is about as desirable as a cheap BMW or Mercedes Benz. What would be the point? Moreover, whom would comprise the market? And for anyone inclined to purchase a Benz or a Beemer, why should they want a cheap one, worse still, one that everyone will know was cheap? And if Mercedes ventures into econo-mobiles, what does it do to the brand? And finally, what analyst advises Mercedes to make economy cars simply so that they can take marketshare from Toyota? Such an analyst would be politely invited to keep his opinions to himself, with swift Teutonic efficiency.

In theory, the iPhone 5c might make greater inroads into middle and perhaps even lower income countries, but those of us who live and frequent such countries would be quick to point out that, the majority or those in the market for an iPhone will both want, and be able to afford, top of the line. Indeed, they will demand it. Perhaps those will less disposable income, but in the market for an iPhone might be content with the less expensive model, but only if it is not perceived as ‘cheap’. The blow to one’s status in such an environment could be non-sustainable depending upon one’s class. And for those in search of a cheap smartphone, most of these are simply not in the market for an iPhone; perhaps something they might aspire to as a mark of success. Like that Mercedes Benz.

1stplacemacuser

I very much think the 5c was produced strictly for framing. The 5c is to set a bottom price for phones going forward. My claim will prove true if the number of 5c’s produced is in line with its lower sales. If they made a bunch of 5c’s and they’re sitting on shelves, then I would be wrong (and Apple would be wrong as well, having miscalculated the interest in a lower end product). If the number of 5c’s made is not that big, commensurate with its sales, then my claim is closer to valid, as it shows that the 5c was made not for massive sales, but to help promote the higher margin product, the 5s.

ksec

The 5C is doing and selling exactly what the 4S were doing when 5 lunched. Although Apple hoped the 5C to take off in certain market like China, which it did not.

5C provide two thing.
In the whole Chain of production the fits and finish of the 5 or 5S aluminum casing is the most time consuming. Most of the other components are finished parts with soldering. Which means if Apple were to have 5 as the 2nd option its production will be slowing down the 5S.
Now Apple literally have those full production line for 5S only. And hence why you see even though 5S is the fastest selling iPhone yet Apple manage to keep up with demand much better then when 5 were released. With All the tuning and yield issues sorted out during 5, this is like a massive 30% capacity boost compared to when 5 were released.

The 5C also means Apple could keep the roughly the same margin as the 5S. While selling 5 would have means lower margin.

So the release of 5C manage to kill two birds with one stone. High production capacity for the best selling iPhone. And Higher Margin for its second best selling iPhone.

Lafael

ksek!  This is the first time I see this explanation for the 5C. And it’s finally an explanation that could make sense. And typically Apple, if its correct. I didn’t really understand it at launch. Thank you.

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