There has been a lot of noise recently about consumers buying older iPhones instead of the latest iPhone 5. It seems like the question that people are asking themselves en masse when standing at an Apple Store (or even before that) is "Why upgrade when I can have almost the latest iPhone for less?"
Some analysts are worried and disappointed about the not-so-high iPhone 5 sales. Shares of Wall Street's favorite company start to shake when these worries transform into figures.
The Los Angeles Times reported that Apple's profit margins have suffered because so many consumers have been opting for older iPhone models. Nevertheless, Foxconn is pushing its employees to work harder to meet demand for the iPhone 5. These two pieces of news seem to contradict themselves, don't they?
Thanks, But No Thanks
Upgrades that come too fast with too few new features are driving
consumers away from the every-18-months upgrade treadmill.
One question that worries investors is whether Apple Inc. (Nasdaq: AAPL) is giving new versions of its iconic iPhone enough new features and innovations to justify the extra money consumers have to pay to remain on top of the game.
The LA Times article mentions something that Apple has repeated many times: People who buy an Apple product keep on buying Apple products as they become satisfied customers. After all, Apple customers love their devices. I can say by experience that this is absolutely true. Once I got my first Apple product, I didn't want to own anything else. I need reliable products, and that's what Apple gives me.
Now, back to the iPhone upgrade situation. According to Apple, when the iPhone 5 was released in September, 5 million units were sold in the first 72 hours -- 1 million more than the iPhone 4S sold in a similar period in 2011 and 3.3 million more than the iPhone 4 sold in 2010. So why did iPhone 5 sales slow after that? More importantly, how will this affect the next-generation iPhone?
Fast, furious, too frequent
I have said several times in discussions here on EBN that iPhone upgrades come too frequently. People don't have time to adapt to the new phone. If there are just a few new features or a little innovation at a premium prize, many consumers may think just moving one model up is enough. They save some money and get almost the latest Apple technology. Who loses? Apple.
There are hipsters who want the latest cool thing. They will queue in front of an Apple Store every time Apple offers a new iPhone -- no matter what. However, is Apple's customer base shrinking, or are the customers simply not upgrading the way they did before?
I once said Apple should stop responding with an iPhone update every time Samsung upgrades its smartphones. It would make more sense to respond more to Apple's faithful customers. However, this is unlikely to happen. Samsung is playing the same game of replying to Apple's updates with updates of its own. It's a game that goes in circles.
The continuous updates from the two rivals, the short product lifecycle, and the constant shifts in marketshare have become too stressful for some consumers. As a result, iPhone customers are not upgrading -- at least not in enough numbers to keep the competition up.