Walmart Is Set to Sell a $99 iPhone

Experts Say Mass Distribution Won't Tarnish Upscale Brand

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NEW YORK (AdAge.com) -- Apple's iPhone is headed for Walmart.

According to Bloomberg, the retail giant is set to sell a 4GB iPhone for $99. The current 8GB entry-level model is $199 plus a two-year AT&T-service subscription.

The current 8GB entry-level iPhone model is $199 plus a two-year AT&T-service subscription.
The current 8GB entry-level iPhone model is $199 plus a two-year AT&T-service subscription. Credit: Apple
The right venue?
Having Walmart move your products is a no-fail proposition for most brands. But if you're a brand with high aspirational appeal such as Apple, do you want your wares showcased an aisle away from laundry detergent and 10-packs of boxer shorts?

Apple didn't return calls for comment.

Getting the iPhone in more pockets across a broad market isn't a tall order; the handset already has shown it can crack socioeconomic barriers. A recent ComScore study showed that while 43% of iPhone owners earned more than $100,000 annually, much growth is also coming from those earning less than the median household income. IPhone adoption since June 2008 grew 48% among those earning between $25,000 and $50,000 per year and 46% among those earning between $25,000 and $75,000.

And Apple has built a premium brand that would be difficult to be commoditized by a low price point. Laurence Vincent, group director-strategy at Siegel & Gale, Los Angeles, points to precedents such as low-price iPods that managed to retain their hip quotient despite their mass penetration.

Mystique intact
"They made it cool; it didn't take away from the mystique," Mr. Vincent added. "Their brand architecture is designed in such a way that allows people who want the more esoteric side that feels more exclusive to get it if they want. And they also come out with another product line for the larger mass market."

What Walmart can give Apple is a lot of bang for the buck. The marketer earlier signaled it wanted to get the iPhone into more hands when it cut a deal with Best Buy to sell its phones, despite its deal with AT&T to be the sole wireless carrier to service the phone.

"If you're trying to sell products, a lot of them move through Walmart. Especially in a down economy, do you want to be choosy where you get your customers?" said Neil Strother, an analyst at Forrester.

Halo effect
Others said Apple may be looking to amp up its distribution while banking on the halo effect of other Apple products. Mr. Vincent said studies have shown that when people start to use Mac products, they want to connect those devices with a Macintosh computer rather than a Windows-based PC.

Walmart declined to comment. But to be sure, the retailer saw what the iPhone did for the AT&T brand. "It has made [AT&T] hipper and relevant, so you could easily see that Walmart is hoping for the same thing, to get some cachet into its brand. It's not the coolest place in the world to go shopping. If they can infuse some youth and energy [with] the iPhone, it's a great idea," said Karl Barnhart, a partner at CoreBrand.

Earlier Walmart teamed up with T-Mobile to sell the G1, the first phone equipped with Google's Android mobile operating system, for $148.88 -- some $30 cheaper than what consumers would pay at a T-Mobile outlet. Adding the iPhone to its lineup is another milestone to show that it can play with the hip brands.

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