No one will ever confuse Apple for a discount retailer – it’s a chore to even imagine that – but the company lately has been slashing prices in a way that is certainly raising eyebrows. Those price cuts come at a time when the company is shifting more toward services, and trying to gain power in payments along the way.
The latest news?
According to reports on Thursday (April 4), Apple has cut by the price of the 64 GB iPhone XR in India by some 25 percent – an approximately $259 decease, at least when combined with another promotion. The phone’s price on the Apple website for India reportedly remained unchanged on Thursday, but the reduction was reflected in stores. An unnamed source in the reports said the price cut reflects a “short-term promotional offer.”
Maybe so, but the price cut is part of a trend. Earlier in April, Apple slashed prices by close to 6 percent in China, a reflection of dwindling demand in that country for Apple’s hardware. The cuts reportedly apply to iPhones, iPads, Macs and AirPods. As one example, an iPhone XR is now priced 4.6 percent lower than it was at the end of March.
The price cuts reportedly were prompted by lower-than-anticipated demand for iPhones in China, Taiwan and Hong Kong. Apple blamed its fourth-quarter revenue shortfall on its China business, with CEO Tim Cook saying at the time the shortfall was 100 percent due to iPhone sales, largely in China. As of the fourth quarter, China accounted for around 15 percent of Apple’s sales.
That’s not all when it comes to Apple price decreases.
On Thursday, news also emerged that the company is trying to spark more sales of its HomePod smart speaker by nearly 17 percent, to $299, per listings on the Apple online store. Earlier this year, Apple said it is bringing its Siri-enabled wireless smart speaker to China and Hong Kong – another move in the global battle for smart speaker supremacy, one of the hottest ongoing trends in retail as consumers start to embrace a connected lifestyle.
So what’s behind the price decrease for Apple smart speakers?
Apple on Thursday avoided commenting on the issue, but analysts said smart speaker competition is likely behind it – devices from Amazon and Google tend to be much less expensive – and that idea is certainly supported by the state of that particular retail market. Some of the latest figures show Amazon is in control of that market, with the company shipping 13.7 million smart speakers in the fourth quarter of 2018, according to Strategy Analytics. That’s good for a 35.5 percent share of the smart speaker market. In the third quarter, Amazon shipped 7.2 million units.
Google holds a 30 percent share, shipping 11.5 million units in Q4, up from 5.2 million in the previous quarter. By contrast, Apple shipped 1.6 million HomePod smart speakers in the fourth quarter of 2018, according to Strategy Analytics. It also noted that during the 2018 holiday shopping season, smart speakers were the “most sought-after tech products,” estimating that around 60 million households worldwide currently own at least one smart speaker.
Analysts on Thursday also wondered if the HomePod price decrease was an inventory-clearing move and a signal that Apple plans to soon launch a newer version of its smart speakers.
The Apple moves on prices this week come as the company continues its shift to rely more on services than devices for revenue and profit. And it follows the launch in late March of the Apple Card, a virtual and physical payment card, and the company’s first entry into the world of credit cards. That announcement came amid other Apple product launches and upgrades, including for streamed content, online gaming and a news and magazine subscription offering.
In a column published earlier this week (April 1), Karen Webster took the position that Apple’s future is as a hardware company, not a services provider, despite signs suggesting the contrary. The recent price discounts don’t exactly inject any new optimism into that hardware future for Apple. As Webster wrote, “The power of Apple’s ecosystem is diminishing at the same time that it hopes to make money from its Services. Netflix and Spotify have already balked at that, and are moving new subscribers to their own websites for acquisition and signup.”
Significant changes are afoot for Apple as the worlds of eCommerce, mobile transactions and digital payments become ever more competitive around the world. Significant questions are being asked about Apple’s future. The deeper motivations behind the price cuts might soon be clear as Apple continues its shift.