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Walmart Cuts Apple Device Prices to the Core

Walmart Cuts Apple Device Prices to the Core

Walmart is making a play for mobile device buyers at crunch time for holiday shopping. The retailer is selling the iPhone 5 with contract for as low as $127. For Apple, the move represents a broadening of its potential market. "Walmart is really flexing its muscles to see how much it can discount," said IDC analyst Ramon Llamas. "This is a very bold move from Walmart."

By Rachelle Dragani MacNewsWorld ECT News Network
12/17/12 1:53 PM PT

Walmart is breaking out the price hatchet and aiming it at some of Apple's most popular products in an effort to attract holiday shoppers looking for a last-minute deal.

The retailer announced it will be carrying a handful of Apple mobile devices, including the recently released iPhone 5, at reduced prices, according to a report from Reuters. The 16GB iPhone 5, normally US$189, will be available with a two-year contract for $127. Apple retail locations sell the phone for $199.

Walmart also is discounting older Apple products, offering the iPhone 4S for $47, about a $50 markdown. Third-generation iPads with WiFi are on sale for $399.

The slashed prices started Friday and are only available at about 3,000 Walmart stores nationwide, not online. iPhone buyers must also sign a two-year contract with Verizon, Sprint or AT&T to receive the discounted rate.

Walmart did not respond to our request to comment for this story.

Sluggish Sales?

It's unclear whether Apple gave the thumbs-up for Walmart's discounts or if the retailer is subsidizing the devices.

Most likely, it's a combination of the two, said Ramon Llamas, senior research analyst at IDC Mobile Devices Technology and Trends. Now that iPhone 5 supply is catching up -- and just in time for the holidays, Apple is probably eager to keep selling its latest smartphone anywhere it can.

"iPhone 5 sales are going to be high, period," he told MacNewsWorld. "For the most part, though, supply has caught up with demand, and perhaps a little sooner than expected. It also came out about three or four weeks earlier in the year than the iPhone 4S did, so there are going to be some interesting dynamics going on with price."

One of those dynamics is Walmart hoping to establish itself as prime spot for purchasing a new mobile phone and plan, Llamas pointed out. In the past, retailers such as Best Buy and Target have been better known for their electronic showrooms, but Walmart might be using sale prices to persuade customers to consider it a mobile retailer.

"Walmart is really flexing its muscles to see how much it can discount, and conversely seeing if Apple is willing to play the game," he observed. "This is a very bold move from Walmart."

Part of Larger Plan

While it may be a bold move for Walmart to take on both carriers and other electronic retailers in a war for last-minute holiday sales, it's not as risky for Apple, said Trip Chowdhry, senior analyst for Global Equities Research.

"Apple has price differentiation strategies," he told MacNewsWorld. "By using different distributors at different times, its product prices are different because the cost of doing business is different. Apple can charge premium prices at its own retail stores because of the high level of service, but there is no Genius Bar at Walmart."

While the company certainly prides itself on offering a high level of service at its own retail locations, it doesn't cringe at the thought of its iPhones and iPads going for different rates at retailers such as Walmart, Chowdhry pointed out. The bottom line for Apple is that it wants to sell more phones. Allowing Walmart, Best Buy, Target or other retailers to offer those phones -- even at a steep discount -- is only ultimately helping to increase sales numbers, he said.

"This is good in that it is giving Apple a breath of distribution channels," he noted. "They understand not everyone is getting to an Apple store, and that's part of their price differentiation strategy. It doesn't tarnish the brand. In fact, it enhances it, because it allows a consumer to get a great product at the right price."


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