Don’t you find it difficult to digest that iPhone is priced at around 700 dollars, although to manufacture that device, Apple has to spend only around 250 dollars? Apple does put hefty prices for its devices in the market, so hefty that it is not accessible to a huge part of the population. Why would a company that already has a huge hoard of cash want more from its devices? Also, how is it that none of the retailers out there is unable to give you any discount on iPhone or iPad or any such Apple products?
First of all, there is something called MSRP, Manufacturer’s Suggested Retail Price, which is the price suggested by the manufacturer, based on the manufacturing cost, required profits, investor suggestions, etc. It is also known as RRP (Recommended Retail Price). It is also the price that you pay to get your iPhone from Apple’s website. Currently, iPhone 5’s MSRP is 649 dollars for 16 GB, 749 for 32 GB, and 849 for 64 GB models.
If you look through the carriers of iPhone, AT&T, Verizon Wireless, and Sprint, you will find that they also sell the phone at about the MSRP. Here are they.
| iPhone Version | 16 GB | 32 GB | 64 GB |
|---|---|---|---|
| Unlocked phone | 649 USD | 749 USD | 849 USD |
| AT&T | 199 USD | 299 USD | 399 USD |
| Sprint | 99.99 USD | 199 USD | 299 USD |
| Verizon | 199 USD | 299 USD | 399 USD |
For unlocked iPhone, the best price you can get is from the Apple store itself, linked above. Subsidized iPhones come with two year or one year plans depending on the carrier. There is no discount given by any carrier for these devices. Hence, the choice of the carrier is all that matters when you buy iPhone.
Why is it that iPhone is priced so high and there are no discounts? Apple maintains a unique pricing policy, by which it makes sure that its devices are sold closer to the MSRP than not. Imagine the general situation, in which the manufacturer sells its device to the retailer at a discounted price. In such cases, the retailer can make money by selling the product at a discount, competing against other retailers. For instance, if iPhone is sold to all retailers for 300 dollars apiece, then Best Buy could sell it at 400 dollars, while Amazon at 450 dollars. It all comes down to who gives the better discount, for the customers to buy the product, doesn’t it?
Apple on the other hand, does not embrace this policy. It is due a major reason you can see. For one thing, Apple’s stores are extremely profitable around the world. Here is the NBC news story detailing how Apple stores make 5600 dollars per square foot. Apple runs the number one retailer outfit in the United States. Apple makes about 18 billion in sales through 400 stores worldwide. This does not compare to Wal-Mart’s 470 billion in sales, but that retailer behemoth is entirely different in that it sells all sorts of items.
The point is, Apple doesn’t need anybody’s support to sell its products. It can make money on its own through its stores—kind of like Apple’s style of doing everything in-house. Due to this exact reason, Apple does not sell its products to the retailers for low prices, and hence the retailers cannot in turn sell the products to us for low prices, unless there is a contract for two years, of course.
Wal-Mart, although it gives customers great discounts, is widely regarded to be evil for financial growth. Manufacturers selling products through Wal-Mart are forced to reduce the prices so much that some of them are forced to go out of business. A huge number of Wal-Mart’s products are imported from other countries like China, thus causing some American businesses lose revenue and employment opportunities in the same niche. When the prices are reduced so much, and Wal-Mart has strong hold over the price and sales, the manufacturers are either forced to put prices that invalidate the whole idea of profitability, or are forced to outsource its manufacturing process to low-wage countries, thus causing unemployment in the US.
By embracing a strong pricing strategy, Apple is not letting this happen to itself.
Another aspect of buying iPhone cheap through the carrier is that you should think about how much you need to pay every month as set by the contract. I went into these top iPhone carriers and looked at the various plan details.
iPhone 5 Carrier Plan Pricing
Here are the findings:
AT&T
AT&T iPhone 5
450 mins: 39.99 dollars per month
900 mins: 59.99 dollars per month
Unlimited: 69.99 dollars per month
Details:
Sprint
Sprint iPhone 5
Unlimited: 109.99 USD pm; with a lot of options including roaming, domestic long distance, push-to-talk, etc.
450 min: 79.99 USD
900 min: 99.99 USD
Verizon
Verizon Wireless
Unlimited talk + various data packages (1GB-8GB): $ 50, 60, 70, 80, 90 (unlimited talk/txt + 1GB, 2GB, 4GB, 6GB, 8GB)
Plus monthly line access fee of 40 dollars with any package.
Also, the carriers do provide various upgrade options based on your existing account details.
In Conclusion
Apple iPhone 5 is an expensive phone, but it still is the most productive device in the market. It has about 800,000 different apps, and most of them have gone through Apple’s strict quality guidelines. Besides them, there are a huge number of accessories that are made specifically for iPhone. You can find accessories from All4Cellular, Mobile Karma, cases from Case123, etc. Also, iPhone is one of the most secure smartphones available.
These are some of the reasons why Apple can still command the hefty price tag on the device. If you own an iPhone, or have opinions, please share with us through the comments.
[Update: ]
Here is an update. Wal-Mart has started selling iPhone for slashed prices: 16 GB iPhone 4S can be picked up for just 39 dollars with contract. Get the details here.
iPhone 5, 16 GB is available for 129 dollars from Wal-Mart Stores. The carriers that Wal-Mart has slashed prices for are AT&T, Sprint, and Verizon Wireless.