iMac Price Increase:  How will it affect sales and the quart

  • Posted: 04 April 2002 10:04 PM

    Subject says it all.  US$100 price increase across the models.  Thoughts?

    Brad

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    Brad Smith
    The Mac Observer

         
  • Posted: 20 March 2002 05:49 PM #1

    Well, it’s still a good value.

    And these are commodity components we’re talking about, so if they’re going up for Apple, they’re going up for Dell, Gateway, et al.

    However, honoring the original price on existing orders, while imperative to avoid a PR debacle, will put a dent in earnings.

    I don’t think they’ll lose too many sales over it; the bargain shoppers would go for the CRT iMac, anyway.

    So many will be relieved by the light at the end of the backorder tunnel, I don’t think there’ll be too much sturm und drang.

         
  • Posted: 20 March 2002 06:55 PM #2

    Hi!

    Here’s the announcement in Apple’s own words: Apple Announces iMac Price Increase

    I believe it’s a smart move. Unlike the commodity box makers, Apple value its ability to fund R&D and product improvements. Anyone who is concerned about Apple’s financial well-being should see the increased cost of the iMac as an investment in innovation.

    Robert

    P.S. Brad, thanks again for jumping quickly on these stories

         
  • Posted: 04 April 2002 04:22 PM #3

    It’s all about profit margin.  Since Apple can’t make enough iMacs to keep up with demand anyway, they’ll sell just as many after raising the price $100.  Plus, with component costs going up their margin would be really bad if they didn’t raise it.

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    “Saiyu sen jikou yo!” - Kazami Mizuho

         
  • Posted: 04 April 2002 10:04 PM #4

    The demand for Apple products is less dependent on price than for the Windows box makers. For one thing, Apple doesn’t compete in the most price sensitive areas of the market.

    The extra dollars per unit will do far more to benefit Apple’s margins than the few lost sales will hurt Apple’s revenue. In fact, Apple’s revenue will increase from the price change because the percentage of increase in revenue will more than outstrip the percentage of lost sales, if any, that may occur.

    Because Apple has regained critical mass and has sufficient sales to support the work of 3rd party developers, analysts are more concerned about profit growth than nominal increases in unit sales, though profit growth is contingent in part on units sales.

    Ok, let’s look at it another way. Here’s a theoretical example:

    Let’s say Apple’s average wholesale price per unit is $1,500 with a 30% margin. That’s a gross margin of $450 per unit.

    Let’s say a discount box maker has an average wholesale price of $750 and a gross margin of 10%. That’s gross margin of $75 per unit.

    The discount box maker doesn’t need to sell three times as many boxes as Apple to make the same gross profit, but six times as many boxes to make the same $450 as Apple. That’s why unit sales are so important to the discount box makers; they need the additional unit sales just to survive.

    This is also why it’s misleading to compare Apple’s unit sales to the unit sales of discount box makers. The major PC box makers also make the most profit per unit from a small part of their PC sales. Apple only competes in the more lucrative part of the consumer PC business, the market for PCs that are priced $1,000 and above. Apple’s percent of that market is much higher than their nominal market share suggests.