Big Macs & iPhones

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The Economist publishes every year a study called the Big Mac Index ‘as an informal way of measuring the purchasing power parity (PPP) between two currencies and provides a test of the extent to which market exchange rates result in goods costing the same in different countries’. And with the upcoming arrival of the iPhone X, and the punchy starting price tag in the US and other countries, there must be a discussion as to what Apple is trying to achieve from a strategy perspective and how this difference in pricing can affect their chances of accessing the Asian market.

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It does feels like Apple is clearly positioning itself as a high-end suppliers of smartphones. It is becoming clear that they have little interest in catering to the lower-value, mass-market segment. And whilst I understand the premise, it seems like they might be missing the long-term value pool in particular here in Asia.

At iCare, through our retail service to low-income people, we have seen a continuous and exponential growth in our smartphones sales. Communication, as well as connectivity and access to social media has become an essential part of societies and of how communities interact. For example, we even see some factories using Facebook as a disseminating tool for HR policies or announcements. Smartphones are thus becoming an integral part of how we live.

Up to now, brands like Samsung, Huawei and even Oppo have had great success in tailoring their products and pricing to our customers. The price points and range of offering gives customers the chance to select products based on their financial capabilities within the iCare program. And we sell tens of thousands of phones per month at an average value of $140. Meaning that the new iPhone X would cost 10-times that (starting price!). We do however sell very little Apple products. And maybe in five or ten years, our customers will have the financial capabilities to start purchasing higher value products like iPhones and iPads. But they will already have a long-term experience using Android OS and I can guess little appetite to switch given than their current brand also has similar those high-end products.

Share-of-habit is such an important part of the journey in device usage and missing the low-value buyers today can have a big impact in the future when that value pool steps up to play.

 

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