You can only push prices so far before customers start turning away from your products. That seems to be the case with Apple's 2018 lineup of iPhones, which are the most expensive ever introduced for customers. A new report indicates that many Chinese retailers have taken the uncommon step of slashing the prices of relatively new iPhones in order to win the attention of customers.
According to Reuters, popular Chinese retailers like Suning and JD.com are discounting models like the iPhone XR by as much as $118 off its starting price. In total, six retailers have instituted dramatic price cuts in order to spur iPhones sales according to the news organization.
At this point it's not known if retailers are taking a hit to their own profit margins by reducing prices across the board, or if Apple is instead footing the bill by providing incentives directly to the retailers (which are then passed on to the customer).
“It’s possible Apple wants to test the market’s feedback if it brings down the channel prices. Or, Apple might be under pressure to clean out its stock of iPhones,” said Canalys smartphone analyst Mo Jai.
Apple is coming under increasing pressure -- especially from Chinese OEMs -- with respect to flagship smartphones. In fact, both Samsung and Apple, which have smartphones that can be optioned out to well over $1,000, have been affected by OEMs like Huawei and Xiaomi. Both Chinese companies have increased their market share in recent years by pumping out high quality Android phones with high-end features and attractive price points. That value proposition is especially playing out in the Chinese market where customers are increasingly purchasing smartphones from the "home teams."
Last week, Apple issued its first earnings warningin well over a decade regarding a revenue shortfall. It revised its forecasted revenue of $89 to $93 billion for fiscal Q1 2018 down to $84 billion.
“Most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad," said Apple CEO Tim Cook. "Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline."
Apple’s iPhone XR, iPhone XS, and iPhone XS Max start at $799, $999, and $1,099 respectively in the United States. However, the latter two models top out at $1,349 and $1,449 respectively in a 512GB storage configuration.