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iPhone and a Changing Marketplace

$ iPhone

Just the other day, Apple reported flat growth in iPhone sales for the first quarter of its fiscal year 2016. Keep in mind the number for sales (and revenue and profit) are phenomenal, but it’s still the first lack of significant growth in the product line’s history.

Here’s a quick thought about a market factor that I believe will be a challenge for iPhone going forward: Carriers are dropping the 2-year contracts. And because of that, customers are seeing the true cost of their iPhones.

I’ve done the math for my family, and dropping the 2-year commitment and paying for our phones resulted in reduced cost over the same time period. That is based on our usage, of course. Your mileage may vary.

But the on-contract price of $199 or even $299 is mentally more appealing than $750 or $850. These higher prices are now being explicitly exposed to buyers. And while consumers are still buying at those prices, I suspect that they will do it less often in the future.

Other factors certainly play into this consumer behavior. Economic conditions around the globe are relatively volatile. The smart phone market is clearly maturing with fewer distinct and meaningful new features being added to the annually updated devices.

So Apple will need to consider dropping the prices of their phones (gasp!).

Apple’s leaders are not stupid. They’ve certainly been aware of these trends and what the company will need to do to adjust.

Just my two cents for today…

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