From the bargain basement low price of the stock, to free shipping on iPhones, Apple seems to have more products than customers these days. Does that mean Apple is in trouble? Or, is the supply finally catching up to demand? What happens when Apple’s product demand is less than supply?
Fire Sale Without The Heat
Don’t worry. I’m not fully convinced that Apple has a sales problem, but it’s looking more and more like an oversupply problem these days.
Apple is subtle. Finding an Apple product on sale is akin to finding an honest politician. There might be a few, but they’re not easily found.
When supply exceeds demand, Apple bundles. For example, they’ll add a low priced printer at a discount for every new Mac sold in a back-to-school special.
If demand in a product exceeds supply, there’s no such thing as a bundle promotion. The most recent promo features free shipping for all iPhone models. Not just the iPhone 5, but the iPhone 4, and shipping is next day.
Apple began offering unlocked iPhones once demand was exceeded by supply. The company has always had refurbished Macs available, but recently began selling them on eBay at substantial discounts.
In the past year I’ve seen more discounts on iTunes App Store gift cards, too– some discounted as much as 30-percent. Many of the online stores that sell Apple products have had greater than usual discounts available on the MacBook line this past year (Mac sales took a huge dive in the most recent quarter).
Older models of all products are offered at discounted prices when new products arrive. That may be as close to a fire sale as Apple can get. For now. Apple also has a tradition of offering discounts that cut deeply into those notoriously high margins on Black Friday, the day after Thanksgiving Day in the U.S.
Our favorite Mac and iPhone maker also has the luxury of growing the distribution channel to more retail outlets (T-Mobile and Staples are on the horizon), which helps to grow sales even while demand is softening.
One way to measure the difference between supply and demand is availability of products from Apple’s online store. If products ship within 24 hours, supply has met demand. If those same products come with a promotion or bundle or new distribution channel, supply has exceeded demand. If Apple begins to acknowledge the differences between their products and competitors, then it’s obvious that competition is having an impact on sales.
As competition between Apple and Samsung increases, for example, we can expect Apple to be more aggressive with pricing (lower prices often stimulate demand) and promotional bundles. I don’t expect Apple to get down and dirty with a cheap iPhone or iPad, but I will be surprised if Apple’s product pricing and positioning carry a large umbrella over near competitor prices.
The smartphone and tablet market segments are highly competitive, and some, including Google and Amazon, are desperate to slow down Apple’s reign over revenue and profits. Hence, the crazy low prices on Amazon’s Kindle Fire HD, and Google’s Nexus line of smartphones and tablets.
Without question Apple doesn’t want to get into a price war with any competitor, but if sales are impacted by competition, expect more promotions, more add ons, more bundles, on everything Apple.
One more thing. With Google shutting down Google Reader, are you re-evaluating your reliance on Google’s apps? Check out On Quitting Google: Cold Turkey? Or, Slow Strangulation?