Thursday 27 November 2014

Apple cuts online price of iPhone 5S to clear stocks; ties up with Amazon, Flipkart and Snapdeal

Just ahead of the launch of the next iPhone,Apple is offering a price cut on its outgoing flagship device. It has tied up with online retailers Amazon, Flipkart andSnapdeal to offer discounts on the iPhone 5S in a move that's sharply contrarian to the strategy of brands such asSamsung and Sony that are fighting to ensure price parity between online and brickand-mortar stores.
Apple is offering an extra Rs 1,500-2,000 in margins to online retailers to liquidate 5S stocks ahead of the new phone launch. This, combined with the usual discounting by e-commerce sites, has made the 5S about Rs 8,000 cheaper online than in brick-and-mortar stores.
That's probably the widest price gap currently for any smartphone or electronic gadget, according to three of Apple's top trade partners.
Tried & Tested Strategy
The 16GB iPhone 5S is available online at Rs 38,000-39,000 while it costs Rs 46,000-47,000 in stores. The idea is to clear out stocks of the 5S, which will get a substantial downward price revision when the new flagship iPhone model is launched, trade sources said. It's a strategy Apple routinely adopts in the US and Europe.
Apple has scheduled a global event on September 9 in Silicon Valley that's widely expected to be the unveiling of a new largescreen iPhone and smart watch concept. Emails sent to Apple, Amazon, Flipkart and Snapdeal did not elicit any response as of press time. "Apple's sudden focus on e-commerce sites has become a nightmare for us," said the chief executive officer of a leading cellphone retail chain, requesting anonymity. "We have even told them that if the situation continues, we may stop picking up stocks of iPhones since our sales have suddenly taken a hit."
While big retail chains have taken up the issue with Apple and have threatened to stop stocking its products, some have negotiated special consumer offers on the 5S, such as a free case with each purchase. Apple follows a uniform pricing strategy around the world, hence it cannot reduce prices across all sales channels in the market. A top trade executive said Apple's strategy was in stark contrast with what other consumer electronics and smartphone makers are currently trying to achieve - a level-playing field between offline and online trade. "We have to see whether Apple is doing this discounting as a regular phenomenon before taking a decision on the way ahead," the person said.
Explaining the large online-offline gap, another of the company's trade partners said, "Apple is offering 3-4% extra margin to ecommerce to be passed on to consumers as discount, apart from usual schemes such as 1-2% more margin if sales target is reached.
The e-commerce firms are further doing their own discounting which has made the price difference this wide." Apple offers an 8-12% retail margin on iPhones, according to those in the trade. As per estimates, modern retail and the exclusive Apple stores contribute around 20% each to iPhone sales in India, while ecommerce and general trade accounts for the remaining 60%.

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