Holiday Sales or Sudden Desperation? The Truth Behind Walmart’s New Apple Prices

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Christmas is always viewed as “the most wonderful time of the year.” Consumers live for the holidays and sales, and coupons ranging from bagels to high-tech electronics and even furniture become as coveted as athletic jerseys in retail stores across the world.

The Apple Corporation has always had its customers and fans serve as part of the hype and excitement for the holidays. In most cases, Apple is too conservative to offer genuine discounts to customers. Take Black Friday, for instance: Apple cut a lot of its prices down by no more than $10-$30. If anything, Apple’s stance showed that the company would not lower its prices in order to satisfy consumers.

Apple’s stance has changed a bit, at least with respect to Wal-Mart. The major retail giant has placed Apple’s products on sale with major discounts. The iPhone 5 (16GB) now costs $147, down from $199; the iPhone 4S (16GB) now costs $47, down from $99; iPads are on sale, down from $499 to $399 ($100 discount) and come with an iTunes gift card worth $30 at Apple’s iTunes store.

The surprise in Wal-Mart’s discounts is that, prior to now, Wal-Mart would only grant $10 discounts on these products. What can explain the sudden change in Wal-Mart’s behavior? Some seem to think that Wal-Mart’s recent discounts have something to do with analyst predictions over a lowered confidence and appeal in Apple products. There were at least three analysts this past week who dropped their view of Apple’s stock. Some decided to become “neutral” on Apple’s earnings while others provided lower predictions for Cupertino’s products than ever before.

Others believe that Wal-Mart wants to offer excellent holiday sales and that reduced prices on coveted Apple products will get consumers out to Wal-Mart to purchase these gadgets. Those who do not agree with either of these options say that Apple is allowing such major discounts as an act of desperation to sell its products. The iPhone 5 sold below analyst Gene Munster’s predictions in its first weekend (5 million instead of 6-10 million) and view this as Apple’s way of surrendering its pride in order to make fast cash. While it has been said that Apple’s fourth quarter will post 47.5 million iPhone sales, Apple is also seeing numerous customers who have departed from Apple products because the company pays more attention to its smartphone designs than its software (as evidenced by the Maps fiasco).

Both of these options could be correct; however, it could also be the case that Wal-Mart, in partnership with Apple, is offering such generous discounts because the iPhone 5, iPad 4, and iPad Mini will become “refurbished” with Apple’s introduction of a seventh-generation iPhone, fifth-generation iPad, and a second-generation iPad Mini on store shelves by March 2013. Maybe the prices are so reduced because it confirms the Apple rumors of a new product line by early next Spring. Apple is known to reduce its prices in wake of a new production line: in the past, the company has reduced its $199 iPhone by $50 over 6 months, then an additional $50 after the smartphone has been on the market for one year. This explains why the $199, two-year contract iPhone 4S now sells for $99 ($100 discount).

There may be some speculation regarding Apple’s desperation, but items such as the iPad Mini have sold in record numbers (with the iPad Mini beating its older brother in sales), leading many to assume that the Wal-Mart discounts are due to nothing more than a new product cycle and good cheer.