Historically low, historically low, why is the iPhone always in price dropping

Snow Leopard Finance Club

2024-07-02 14:24Creators in the field of technology

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During the 01618 mid-year promotion, the price difference between online and offline Apple products reached the highest level in history, affecting the profit margins of offline authorized distributors and retailers across the country.

02 E-commerce platforms such as Pinduoduo, JD.com, Taobao, Douyin Mall, etc., have lowered the price of iPhones to a level similar to that of official channels through high subsidies.

03However, Apple officials turned a blind eye to price abuse, and even acquiesced to price concessions on e-commerce platforms in exchange for sales growth in the Chinese market.

04Due to the over-reliance on discounts from online channels, Apple's sales in the Chinese market are becoming more and more anxious, and the brand's golden sign is gradually losing its color.

05Experts pointed out that for high-end products, frequent discounts or too large discounts will damage the high-end pricing strategy, but Apple may not survive in the current Chinese market without rolling prices.

Technical support is provided by Tencent Hybrid Model

Sales volume is more important than high-end image

Author丨Han Xing

Cover source丨Photo.com

One afternoon in June, Zhang Qing (pseudonym), a clerk at the Beijing Wangfujing Apple Direct Store, handled three customers' return requests in 10 minutes.

One of the customers had just bought the latest Apple Watch in the store, and just a few minutes after walking out of the store, she found that the same product participating in the 618 promotion on the e-commerce platform was nearly 600 yuan cheaper than the store, so she turned back and returned the watch she had just bought on the spot. Two other refunds, for similar reasons.

Those who buy Apple products in offline stores are usually the least price-sensitive group of users. "But there are no limits to being sensitive, and online is too cheap, even I am a little tempted." Zhang Qing told Snow Leopard Finance Agency.

E-commerce platforms are crazy about low prices, and the difference between online and offline prices of Apple products is constantly magnified. During the just-concluded 618 Mid-Year Promotion, this gap was magnified to an all-time high.

Apple's price system has been disrupted, affecting not only the offline official stores that never cut prices, but also the profit margins of offline authorized distributors and retailers across the country have also been greatly squeezed. "Buying" from e-commerce platforms with lower prices can earn higher profits than purchasing from official channels.

Apple, behind the chaotic price, is enjoying the proud results of the 618 list, while silently swallowing the bitter medicine of price reduction.

iPhone price slash

After receiving the 3 returned consumers, Zhang Qing took out her mobile phone and looked at the Tmall Apple flagship store. Combined with platform discounts and 88VIP member discounts, the price of iPhone 15 Pro Max has been nearly 3,000 yuan lower than that of directly operated stores.

iPhone sales are highly cyclical. Prices usually fall gradually from the launch of new products in September, and drop to the lowest point in June of the following year. In addition, Apple's official price reduction promotions are rare, and every year at 618, major e-commerce platforms will shout the slogan "iPhone drops to the lowest price in history".

Among them, Tmall Apple flagship store is the only online direct store officially authorized by Apple. "Even the price of the official authorized direct sales is rolled up like this, and it is understandable that customers only shop and do not buy or return."

According to Zhang Qing, after entering June, she explained to the customers in the store the most every day that Apple products purchased in offline direct stores can enjoy 14 days of no reason to return and exchange, old equipment can be deducted on the spot, and it is more convenient to do data migration in the store.

"In the past, users might pay a premium of a few hundred or a thousand yuan for these services, but when the premium exceeds two thousand, it may be too luxurious for many people." Zhang Qing told Snow Leopard Finance Agency.

Liu Hao (pseudonym), a mobile phone retailer in a third-tier city, got a wholesale quotation from the official distribution channel on June 6, and the purchase price of the 128G iPhone 15 and iPhone 15 Pro was 4,700 yuan and 6,050 yuan respectively. "Usually one or two pieces (100~200 yuan) are added to the purchase price to sell." Liu Hao told Snow Leopard Finance Agency.

As a comparison, the official prices of the two models are 5999 yuan and 7999 yuan respectively.

But there are more profitable sources of goods than taking them from official distributors.

At the same time that Liu Hao got the quotation, the 618 mid-year promotion of major e-commerce platforms was opened. In Pinduoduo's 10 billion subsidy channel, the price of iPhone 15 and iPhone 15 Pro is about 300 yuan lower than the price of the official channel, and the price of JD.com, Taobao, and Douyin malls is also lower than the official wholesale price.

A group of scalpers known as "platform sweepers" were born.

They compare prices on various e-commerce platforms, select the lowest price among them, and then sell them to offline retailers after appropriately increasing the price. The difference between the price of the e-commerce platform and the price of the goods offline is a few hundred yuan, which is their profit margin.

Even if the iPhone is recycled at a higher price from scalpers, it is still more profitable for retailers to buy from official sources. Sun Ping (pseudonym), who has been engaged in Apple's authorized distribution for 12 years, told Snow Leopard Finance Agency, "The scalper price increase is still more than 100 yuan cheaper than taking the goods from the official authorized channels." ”

Some of the iPhones that flowed out of e-commerce platforms were sold to offline consumers after two price increases by scalpers and retailers, and "a large part of them returned to e-commerce platforms from retailers."

E-commerce platforms are not only subsidizing wool from scalpers and offline retailers. A Pinduoduo merchant told Snow Leopard Finance that Jingdong and Douyin Mall are also their purchase channels, and the control of "peer sweeping" on various platforms this year is obviously not as strict as before.

In this chain, scalpers and retailers earn scalping profits, and platforms gain traffic and GMV.

In response to the low-price offensive of online channels, Apple's official website launched a 400 yuan deduction subsidy for old equipment during the 618 period. However, compared with the drop of thousands of yuan on e-commerce platforms, such strength seems a bit small.

Out-of-control price system

Apple is losing control over the prices of its products.

Objectively, Apple's large and complex sales system provides room for price adjustment of its products.

Apple's sales channels in China are divided into online and offline. Among the online channels, Apple's official website and Taobao's official Apple flagship store are officially directly operated, while JD.com's self-operated flagship store for Apple products, Sam's Club, Suning.com, etc., are officially authorized online distributors.

Offline channels are more complex and are divided into three tiers: direct sales, direct supply and distribution.

Direct sales and direct supply mainly cover first- and second-tier cities, including Beijing Sanlitun, Wangfujing and Shanghai Jing'an stores, etc., and direct supply channels are Apple Premier Resellers such as Dragonstar and Coodoo, which are common in major shopping malls.

Cities outside the first and second tiers are mainly covered by Apple's authorized distributors. At present, there are 23 authorized distributors on Apple's official website, which are responsible for distributing Apple's products to secondary distributors and then distributing them to tens of thousands of Apple retail stores across the country.

The larger the volume of the authorized distributor, the lower the price of the goods.

A regional warehouse manager of an authorized distributor told Snow Leopard Finance that larger distributors such as Aisid and Tianyin have higher bargaining power, and they often have the lowest wholesale prices. The circulation of these low-priced iPhones in the industry is called the "secondary market" of iPhones.

But again, only e-commerce platforms and secondary distributors with a large enough shipment volume can get the lowest price from these 23 large distributors. This secondary market is the main source of goods for Pinduoduo and Huaqiangbei.

Not only that, after the e-commerce platform obtains the lowest price source, it will carry out another round of subsidies, which further widens the price gap with official channels. Taobao and JD.com, which are in different parts of Apple's sales system, although the price of goods is higher, but under the trend of price comparison across the network, the price has also been hit to a level similar to that of Pinduoduo through high subsidies, which is lower than the wholesale price of some official distribution channels.

Therefore, for Liu Hao's small offline retail stores and stalls, instead of looking for low-price sources in the secondary market, it is better to purchase directly from online during the big promotion.

The more fierce the price war of e-commerce platforms, the more Apple's price system will get out of control.

In 2019, when Pinduoduo first launched the 10 billion subsidy channel, the price of the iPhone was only a few hundred yuan cheaper than Apple's official website. In the following years, as various e-commerce platforms became involved in low-price competition, the gap between the online price of iPhone and the official price became wider and wider. During the 618 period in 2023, the lowest price of the iPhone 14 Pro on the whole network is about 1500 yuan lower than the official price. By 2024, the price difference of more than 2,000 yuan will be everywhere.

Apple hasn't always turned a blind eye to price gouging. In 2020, Apple imposed strict online price controls on the newly launched iPhone 12 series products that year, strictly prohibiting authorized distributors from flowing low-priced goods to e-commerce platforms.

However, with the fierce competition that Apple has faced in China in recent years and the decline in mobile phone shipments, Apple's online price control has long been loosened.

Suffering from "price reduction dependence"

Although the price reduction will have a certain negative impact on the brand image, in the face of sales, Cook chose to make the latter's numbers look better.

In the past two years, Apple has not only stopped strictly guarding the flow of distributors' goods online, but the official directly operated stores have also changed their cold style in the past.

In July 2022, Apple's official website broke with convention and launched a non-educational discount campaign for the first time before the release of a new phone. From July 29 to August 1 of that year, some official website products can enjoy discounts ranging from 150 yuan to 600 yuan.

5 months later, Apple launched a New Year's Eve promotion on the official website, and consumers can enjoy instant discounts on eligible products purchased with designated payment methods, with a discount range of 100~1000 yuan.

On the eve of 618 in 2023, Apple will "follow the local customs" and open the premiere of its official flagship store on Tmall, with different degrees of discounts on all products. Among them, the original price of 7999 yuan for the 128G version of the iPhone 14, the price after the discount is 6499 yuan, which is 1500 yuan cheaper. Although the promotion is mainly based on platform subsidies, as the only online direct platform authorized by Apple in China, it is inseparable from Apple's acquiescence.

In fact, Apple did get a taste of the price cuts.

IDC data shows that in Q4 and the whole year of 2023, iPhone shipments will rank first in the domestic market, with market shares of 20% and 17.3% respectively. On the 618 mobile phone sales list announced by Taobao and JD.com this year, the three models of iPhone 15, iPhone 15 Pro and iPhone 15 Pro Max dominate the top three without any suspense.

IDC believes that although Apple has been significantly impacted by competing products in the domestic high-end market, coupled with the limited range of its own product upgrades, resulting in a decline in attractiveness, it has still attracted more consumers driven by relatively large price reductions and promotions through third-party channels.

But at the same time, Apple is also suffering from "price reduction dependence".

Entering 2024, iPhone sales are under pressure again. Zhang Qing told Snow Leopard Finance that in the past, the off-season for iPhone sales would start in April and May, but after the Spring Festival this year, the off-season came early.

Liu Hao also observed that Apple's distributors have been shipping prices almost "one day a day" since the end of February this year. Around Women's Day on March 8, the wholesale price of iPhones in the secondary market has dropped to a level close to 618, "Apple's 618 started 3 months earlier this year."

In the first quarter of this year, without the Double 11 and 618 promotions, the iPhone quickly lost its first position in the market. According to IDC, Apple's smartphone shipments fell 6.6% year-on-year in Q1, slipping from the first place in the previous quarter's market share to fourth place, and the market share fell 2.2 percentage points year-on-year to 15.6%.

Ivan Lam, an analyst at Counterpoint Research, believes that Apple's sales in China have become increasingly reliant on discounts from online channels.

The golden sign is fading the apple, and anxiety is inevitable.

Hermann Simon, a well-known German management scholar who once proposed the concept of "hidden champions", wrote in his book "Pricing to Win" that for high-end products, any promotion and discount activity is poison. Discounting too often or discounting too much can hurt a high-end pricing strategy.

But for Apple, if it doesn't roll up the price in the current Chinese market, it will be abandoned by users, and following the local customs may be the best way to survive at this stage.

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