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Is WalMart Key To iPhone Domination?
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DawnTreader
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The writer of this story thinks the high volume retailer is essential to the iPhone’s exposure to millions of potential buyers.
Comments?
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danthemason
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So you could choose to lower your price and margin to gain share ,
or you could sell from the biggest retailer in the world and hold your price.
Wal Mart as a partner is probably as good as a whole other continent in market potential
Maybe it can be the cell phone “for the rest of us”
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In the county where I live, there are only a three places to buy an iPhone… two AT&T stores and one Best Buy. The closest Apple store is an hour away. There are four Walmarts, all in prime locations.
Speaking of locations, the iPhone display at the local Walmart is situated at the endcap of the phone counter. Great exposure, and impossible to miss.
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I don’t think the key is Wal-Mart although it can’t hurt. Time is the key. I read lot’s of posts on other message boards unrelated to tech and there are many who post about the viability of the storm/pearl/n70 or what have you. People don’t have a clear understanding of what the difference is between an iPhone and its competition as of yet. Worse yet, it takes a couple of weeks of owning one just to master the nuances of the touch interface. It reminds me so much of the early days of the Mac when people would look at mine and have not a clue of what I was so excited about. The difference here is that they weren’t in the market for a “personal computer” at that point in time whereas they’ll be looking at phones to purchase in the near future. I’m in the camp that thinks the millions of iPod touches they’re putting into the market is almost a guarantee of a future iPhone purchase. Time is the key.
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Wal-Mart isn’t really elling the phone for a significant savings ($2 off, I think). The spin I heard an NPR commentator put on it was:
For Apple, it can introduce their products to a new audience?those that haven’t traditionally gone for “up scale” items.
For Wal-Mart it introduces their stores to the audience that normally does go for upscale products and thus hasn’t been shopping there.Will the iPhone sell well there? Probably not, since most of the store’s daily traffic isn’t to be able to afford the contract. But in some cases, especially in rural areas that lack Best Buy or Apple stores, Wal-Mart does have a major reach and units may move that wouldn’t have otherwise. The PR is good, one way or the other.
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It can’t hurt, but I’m probably not the best one to judge, as I’ve never been inside a Walmart. It would appear, however, that the reliance on Apple stores and AT&T isn’t sufficient coverage.
And I’m still waiting for Apple to take a new turn on the “I’m a PC” campaign with “I’m a iPhone, I’m a Blackberry” series. I’ve scripted one episode but haven’t filmed it yet.
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I was very surprised to hear that Apple had chosen to partner with Walmart in selling the iPhone. Walmart is about as politically incorrect as a major corporation can get, not to mention that its customer base is not wealthy enough to afford an iPhone contract. Times are hard economically for most of us. Even I, who have lusted after an iPhone since it was announced, had a very difficult time justifying it until my 3G, tetherable RAZR was toothed almost to oblivion by my puppy. I’d been saving for it, theoretically, anyway, but could just as easily keep saving since the sky is looking like that “rainy day” will be here any minute now.
My point is, it seems as though Apple is diluting the iPhone brand by selling at Walmart. That’s kind of like Jimmy Choos being sold at Payless. Yes, WalMart has excellent market presence, but is it worth taking advantage of that presence to harm the status of the iPhone as something of an “elite” purchase? If Schiller comes out with another model of iPhone that’s clearly geared toward a less exclusive clientele, then I’d be all for the Walmart partnership. Until then, I really do have to be concerned.
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In many respects this is a win-win situation; Wal-Mart is trying to get more of the upscale market and Apple needs more outlets. The fact that Wal-Mart was only able to negotiate a $2 savings compared to subsidized retail is quite amazing. It makes one wonder who approached who?
BTW, I read the Best Buy is going to sell the iPhone at $10 below retail ($189) in light of the Wal-Mart move.
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Best Buy is already selling at $10 less than MSRP.
[ Edited: 28 December 2008 09:40 PM by Intruder ]Signature
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Any idea why they waited until the 28th to roll it out at WMT? My only guess is to smooth out next Qrts. earnings bit.
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iPod retailers are ubiquitous! Why not the same for iPhone?
I think if teens want an iPhone to be cool, WalMart is the ideal location for them. Sometimes it is the only location in town.
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This clipping from a recent iLounge.com poll suggests WalMart may be superfluous:
With over 3,800 votes from iLounge readers, our latest poll, ?Which new iPod or iPhone did you get for the holidays?? has closed. Readers were given a choice between the iPhone 3G, iPod touch, iPod nano, iPod classic, iPod shuffle, accessories, or none at all. Amazingly, half of all respondents said they received an iPhone OS device over the holidays, with a third of readers (33%) receiving an iPod touch and the other 17% receiving an iPhone 3G. Another 17% of readers received an iPod nano, while 8% received an iPod classic, 6% received accessories but no new iPod or iPhone, and only 2% received an iPod shuffle. It appears to have been a big year for upgrades, as only 18% of readers said they didn?t receive an iPod, iPhone, or accessory. Thanks for all your responses!
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I would say that WalMart is on the same order of importance as Costco, maybe a little higher. Helps product exposure, availability and sales, sure, but the Apple Stores and the AT&T stores combined are doing just fine on their own. At this point, as was the case when Costco starting stocking iPods, the snowball is already quite huge and well on its way down the mountain.
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turleymuller
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I know some have commented that WalMart may weaken Apple’s brand image, but I don’t see Apple as trying to be elite or status brand. It may be sold at WMT, but the price is the same, the quality of the phone is the same. I think we would be looking at a different story if AAPL offered a cheapo, stripped down version to be sold in WMT.
Also, Not every WMT has lower-end customers. The WMT in Oxford MS (ole miss) and especially in Park City, UT are quite upscale. (relatively speaking). There are other locations that are similar out west and in Florida, etc. These low-populated areas usually just have few Mom&Pop;outfits with a limited selection of goods. A WalMart goes in, and captures a monster share of spending since has everything in one place at decent prices. Of course it puts mom & pop out of business, and the town becomes entirely supplied by WMT, but it’s not because of undercutting prices, it’s because of the convenience and vast selection typically not found in rural areas.
And referring back to my examples, these towns have very affluent populations who depend on WMT for household / personal staples, but most of the discretionary items there are surprisingly high-end. If these stores only had discount brands, customers wouldn’t buy it. These areas are usually to small for BBY or ODP or BBBY etc, which don’t have daily staples to attract routine purchases, so WMT doesn’t have any competition in terms of electronics/appliances/ garden&patio;etc. I know these type stores a just a small fraction of WMT base, but it’s important to remember that “lowest price” is not WalMart’s only competitive advantage. it’s also logistics for sparsely populated areas that are way-under served. WMT greatly extends the iPhone’s reach. That’s a benefit for Apple.
I am confused most everyone thinks that it was AAPL’s idea to go into WMT and they took the idea to them. That is was some strategic plan, I personally think it was WMT beating down Apple’s door, and they agreed since there are some advantages. But, I think it was clearly WalMart taking it to Apple.
This is about WMT and BBY. My contact at BBY has been telling me that BBY is very anxious over WMT and that they expect to have all out war. It started with the redesign of the electronics dept along with blue shirts replacing those ugly vests. WMT copied off BBY, and WMT has been trying to improve brand image in electronics etc. BBY is worried that WMT would sell way below cost just to generate traffic and make up for it on all its other products. BBY doesn’t have other products to make up losses on. BBY
Doesn’t seem funny that WMT employees were speaking at will to the media and customers when there had been no official announcement, thus still under a NDA? Also, doesn’t seem weird that there was a rumor about a $99 4GB model only exclusive to WMT? Out of respect to BBY, WMT couldn’t sell or announce the iPhone until after christmas. But, I think WMT wanted to word to get around, especially that a cheap model was coming, so that customers would postpone until after christmas. This obviously hurst BBY. Apple and AT&T still make money regardless.
It’s fitting that week before Xmas—- when word got out that it would be $197 not $99, that BBY dropped its price by $10. Knowing that WMT had already agreed to an advertised price at launch. Then, I thought it was comical in the official PR day after christmas, that WMT said price will be $197 but “it would match any competitor’s lower price”. Who might that be?? WMT said that explicitly in the PR I assume because it couldn’t publicly quote a lower price, such as $189 like BBY, even though that’s what WMT is selling them for.
BBY wasn’t trying to boost iPhone sales with it’s $10 price cut, per se, just make WMT look stupid with its $2 discount and get back at WMT for interfering with its iPhone sales before WMT was allowed to sell it.
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I am confused most everyone thinks that it was AAPL’s idea to go into WMT and they took the idea to them. That is was some strategic plan, I personally think it was WMT beating down Apple’s door, and they agreed since there are some advantages. But, I think it was clearly WalMart taking it to Apple.
I’m betting this is quite true. I remember either the CEO or a senior exec from Wal-Mart admitting they had blown the whole iPod thing in the early days. They had tried to muscle Apple and yanked the iPod replacing it with some alternative of which they sold almost none. The admission of a mistake being made raised my opinion of management at Wal-Mart. From a personal standpoint, I’m quite fond of Sam’s Club as they supply my drugs of choice…, Folgers and Coffee-Mate! 8-)
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DawnTreader
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I know some have commented that WalMart may weaken Apple’s brand image, but I don’t see Apple as trying to be elite or status brand. It may be sold at WMT, but the price is the same, the quality of the phone is the same. I think we would be looking at a different story if AAPL offered a cheapo, stripped down version to be sold in WMT.
I don’t recall having personally shopped at a Wal-Mart or even having entered one of the company’s stores. For that matter, were it not for the iPhone, I would not have stepped foot in an AT&T wireless store and would have remained with Verizon.
Let’s not forget much of the profit potential of selling iPhones is the high mark-up on accessories. Expanding sales to include Wal-Mart expands the points of purchase for accessories as well. I’m sure many accessory makers don’t see the iPhone as an elite product, but a high volume product from which to make product sales with accessory items. The more people dependent on your product for related sales the more people selling your product.
Further, every iPhone sale increases the market for developers. The iTunes app store and its thousands of apps is a differentiating point between phones and a selling point for the iPhone. In viewing the availability of iPhones at Wal-Mart one must consider the value of this relationship for developers and accessory makers as well. The iPhone and the iPod necessarily must have deep and broad eco-systems to sustain and push sales.
I see nothing wrong with making iPhones available at Wal-Mart. I don’t understand the point of view of those who suggest it will somehow cheapen the brand name or value.
The iPod continues to be popular due to its ubiquity in our culture and the thousands of points of sale. I don’t see the iPod as a status product anymore than I view the iPhone as a status product. There’s far more at stake for the iPhone and its global success than each handset sale. It’s a handheld computer that needs the support of developers and accessory makers to keep it at the top of its market. Developers and accessory makers can’t sell iPhone/iPod touch apps and accessories to people who don’t own the devices. Expanding sales points to include the world’s largest mass merchandiser makes definite economic sense especially when one considers the need to grow and sustain the product’s eco-system for those making constituent and ancillary products.
