Busi­ness: Ap­ple in ‘price war’ amid sales woes

▶ Cuts un­likely to re­verse trend due to deeper trou­bles: an­a­lysts

Global Times - - FRONT PAGE - By Wang Cong

Af­ter many Chi­nese on­line re­tail­ers slashed prices on iPhones in re­cent days, Ap­ple Inc ap­pears poised to aban­don its long­time suc­cess­ful pre­mium-pric­ing strat­egy and in­stead launch what some call a loom­ing price war to re­verse its poor sales in China.

But if the Cal­i­for­nia-based com­pany plans to bet solely on cut­ting prices to boost its sales in the world’s largest and in­creas­ingly com­pet­i­tive smart­phone mar­ket, it is en­ter­ing un­charted wa­ters that will likely lead to nowhere as cost per­for­mance is what its Chi­nese ri­vals have mas­tered over the years, an­a­lysts said.

Fol­low­ing a rare rev­enue warn­ing from Ap­ple, cit­ing poor de­mand in China, sev­eral Chi­nese elec­tron­ics re­tail­ers in­clud­ing JD.com, Alibaba’s Tmall and Sun­ing.com, slashed iPhone prices by as much as 1,200 yuan ($177.53). That was a dra­matic change from pre­vi­ous im­ages of Chi­nese con­sumers camp­ing out­side of Ap­ple stores overnight or pay­ing ex­tra to get the lat­est iPhone mod­els just a lit­tle ear­lier than oth­ers.

Prices cuts by re­tail­ers to boost sales ahead of the Chi­nese lu­nar new year hol­i­days are com­mon, but the lat­est signs sug­gest that Ap­ple was be­hind the moves. The Xin­hua News Agency re­ported on Satur­day that both JD.com and Sun­ing.com con­firmed that they re­ceived “of­fi­cial no­tices and au­tho­riza­tion” from Ap­ple.

“There is no way elec­tron­ics re­tail­ers would cut their prof­its by this much with­out Ap­ple’s sup­port,” said Wang Yan­hui, head of the Shang­hai-based Mo­bile China Al­liance, not­ing that the move is bad news for Ap­ple. “This means Ap­ple’s long-held pric­ing strat­egy is on shaky ground,” he said.

Ap­ple did not re­spond to re­quests for com­ment as of press time on Sun­day. Prices of iPhones on the com­pany’s China web­site were un­changed.

The wide­spread price cuts came af­ter Ap­ple is­sued its first rev­enue warn­ing in 12 years ear­lier this month, at­tribut­ing the move to slow­ing de­mand in the Chi­nese mar­ket and drag­ging down its shares down 10 per­cent at one point.

The com­pany has been fall­ing be­hind some of its Chi­nese ri­vals in terms of sales in re­cent months. Ac­cord­ing to re­search firm Coun­ter­point, in the fourth quar­ter. Ap­ple was ranked fourth in terms of mar­ket share in China, with 9 per­cent, well be­low the 23 per­cent held by the top ven­dor, Huawei Tech­nolo­gies Co. With in­no­va­tion reach­ing a “bot­tle­neck” not just at Ap­ple but across the in­dus­try, “the only choice for Ap­ple is to cut prices,” Wang said, not­ing that the im­pact of the price cut on sales re­mains to be seen, “but it’s not very pos­i­tive.”

Al­though the cuts were sub­stan­tial by Ap­ple’s stan­dards, its prices are still very high com­pared with those of many Chi­nese hand­sets, in­clud­ing Huawei’s pre­mium mod­els such as the new Mate 20 se­ries. An iPhone XR with 128 gi­ga­bytes of stor­age, a rel­a­tively cheap ver­sion in the lat­est iPhone se­ries, could still cost 5,799 yuan, higher than the Huawei Mate 20 Pro, which is priced at 5,699 yuan.

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