When Apple chief executive Tim Cook announced the company’s shock quarterly revenue downgrade overnight on Wednesday, he blamed the company’s problems on a slow-down in the Chinese economy, which it said was hurting its iPhone sales.
Minimal changes
But the US tech giant conceded another key point behind slowing revenue – users in developed markets like Australia just aren’t rushing out to buy the latest iPhones the way they used to.
“While greater China and other emerging markets accounted for the vast majority of the year-over-year iPhone revenue decline, in some developed markets iPhone upgrades also were not as strong as we thought they would be,” Mr Cook said in the shareholder statement.
This situation is reflected in Australia, where more people are holding on to older iPhones rather than buying the latest models.
Beyond minimal changes to features like camera and screen quality, the main reason Mr Numa resisted upgrading to the latest fleet was price.
“Why would you spend nearly $2000 to get almost the same result?” he said.
Anthony Agius, a technology analyst and editor of tech news outlet The Sizzle, said Apple miscalculated what people could and would pay with the particularly high price points of the latest range.
The 256GB iPhone XS costs $1879, more than a $1849 13-inch MacBook Air laptop.
Mr Agius said the fact he and fellow tech associates couldn’t justify buying the latest iPhone revealed a lot about consumer buying patterns.
“For the average person it’s a tough sell. Even for the diehard Apple fans – it’s a tough sell,” he said.
Mr Agius said Apple will have to push other revenue drivers, like its music-streaming service Apple Music or its iCloud storage service fees, as more customers stay with their current phones.
Reached a limit
Graham Hay, a portfolio manager at Antipodes Partners, agreed that Apple’s strategy of driving up the price of its latest iPhone models might have reached a limit.
“Apple’s model has been to generate growth through price increases but you are narrowing the addressable market and it becomes harder and harder for people to upgrade,” he said.
“The smartphone market has matured – the penetration rate has hit saturation point and for the last few years there has been an elongation of replacement cycles.
“Apple has withstood that headwind through being Apple, frankly. They drive a loyal customer base but they have had to achieve growth through price increases versus volume growth.”
New features are needed to justify price increases, but that mandate becomes tricky when the product is already excellent and going out on too much of a limb with changes risks alienating loyal users who like their iPhones to look and feel like iPhones.
For Amadou Doumbia, a marketing expert at Sydney-based media agency Magnum & Co, his iPhone is a key part of his job. He has no plans to replace his current iPhone 7 Plus unless it breaks and sees spending upwards of $1000 on a smartphone as “extreme”.
“Having an iPhone does make life simple,” he said. “I’m probably going to stay with Apple until someone else comes along and gives me better value.”
from A Viral Update http://bit.ly/2Rzb3D0
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