Apple Installment Plan: The question of whether or not Apple Inc. (NASDAQ:AAPL) should sell cheaper alternatives to its high priced products is never going to die down. For example, former Apple CEO John Sculley believes the company should offer a cheaper iPhone to consumers in emerging markets.
Bloomberg is reporting that Apple will now let Chinese buyers purchase iPhones and MacBook devices via an installment plan. This may not be the equivalent of offering a cheaper alternative, but it definitely hints at one thing: the company realizes it needs to do something to compete with lower priced devices. Even more so, they don’t want to miss out on taking full advantage of the Chinese market – which is the world’s largest.
Here is a brief excerpt from the Bloomberg piece:
“Payments on purchases costing from 300 yuan ($48) to 30,000 yuan made via the company’s Chinese website can be spread over as long as two years, according to the site. The plan, which requires a China Merchants Bank Co. (600036) credit card, has fees ranging from zero to 8.5 percent.”
It will be interesting to see how this sits with residents of China in the weeks ahead. Will they be more willing to purchase an Apple Inc. (NASDAQ:AAPL) device now that they don’t have to pay in full upfront? Or will the majority of people realize that they are actually paying more in the long run and opt for a cheaper alternative?
According to Apple’s China website and interpreted by Bloomberg, consumers will have multiple payment options:
“Online customers in China will be able to split payments into three, six, 12, 18 or 24 installments, according to Apple’s website. Through Jan. 23, choosing 12 or fewer installments carries no fee. A fee of 6.5 percent of the selling price will be charged for 18 installments, and 8.5 percent for 24 installments.”
“Carolyn Wu, a Beijing-based Apple spokeswoman, declined to say how or if those fees are divided between the company and the bank.”
The article also goes on to discuss Apple’s current place in the China smartphone market:
“Apple dropped to sixth in China’s smartphone market in the third quarter, from fourth in the prior three-month period, as local producers lured buyers with smartphones costing less than 1,000 yuan each, according to researcher IDC.”
Once again, it does not appear that this drop had anything to do with the actual devices offered by Apple Inc. (NASDAQ:AAPL). Instead, consumers are shopping based primarily on price.
Mark Natkin, managing director of Marbridge Consulting Ltd., a Beijing-based market research firm, does a nice job bringing this story together:
“There is an enormous mid-range consumer market that they are not tapping into. They’re trying to figure out how to make products more accessible to that market segment. This is a good step in that direction.”
What do you think about this move by Apple? Will this strategy work, or will the company be forced to eventually offer cheaper devices?
Check back here for more updates on Apple Installment Plan.
DISCLOSURE: I have no positions in any stock mentioned.
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