iPhone 5 Pre-order Sales Exceed Apple's Expectation

Based on this article:

Apple Says iPhone 5 Demand Outstrips Supply As Pre-Orders 'Shatter' Previous Record 

Connie Guglielmo 

9/17/2012 @ 1:30PM
http://www.forbes.com/sites/connieguglielmo/2012/09/17/apple-says-iphone-5-demand-outstrips-supply-as-pre-orders-shatter-previous-record/

Apple said demand for the iPhone 5 set a record and has already surpassed its initial supply, with some customers who pre-ordered the device now having to wait until October to get their hands on the slimmer, lighter new smartphone.More than 2 million phones were bought in the first 24 hours after Apple started taking pre-orders on Sept. 14. That’s double the 1 million in first-day pre-orders for the iPhone 4S, which was released in Oct. 2011. (First day pre-orders for the iPhone 4: 600,000).AT&T, the first carrier to offer the iPhone when it made its debut in 2007, said today the new model was the fast-selling iPhone it’s ever offered, based on the first three days of sales.“The customer response to the iPhone 5 has been phenomenal,” Phil Schiller, Apple’s marketing chief, said today in a statement. “iPhone 5 pre-orders have shattered the previous record held by iPhone 4S.”

The iPhone 5 will be released on Sept. 21 in the U.S. Australia, Canada, France, Germany, Hong Kong, Japan, Singapore and the UK. While most customers who pre-ordered the device from Apple will receive it in September, some will have to wait until October, the Cupertino, California-based company said.
But that doesn’t mean users won’t be able to get their hands on the phone this week, which is thinner, faster, weighs less than its predecessor, supports LTE networks and also has a larger 4-inch display in the same form factor as the previous model. Apple will have phones in stock for customers who line up at its 356 retail stores in the U.S. starting Sept. 21 at 8 am local times.AT&T said today it still has phones available for pre-order. The phone will also be available at Sprint, Verizon Wireless, some Best Buy, RadioShack, Target and Walmart stores and a few Apple resellers.Still, analysts expect customers to line up days in advance at Apple stores to purchase one of the new black or white phones, just for bragging rights to say they got it on release day.“The significant interest in the product is a result of pent-up demand as some customers had been holding off their purchases since the beginning of this year,” said Abhey Mamba, an analyst with Mizuho Securities. “Our in-store checks over the weekend indicated very strong demand for the product as Apple is not only experiencing strong upgrade activity, it is also gaining customers from other platforms like BlackBerry and Android. We expect Apple to show significant market share gains.”Apple’s shares rose to just shy of a record $700 earlier today. They rose $8.50, or 1.2 percent, to close at $699.78 in regular Nasdaq trading.The success of the iPhone 5 is key since the smartphone is now Apple’s top moneymaker, accounting for almost half of sales. Since former CEO Steve Jobs introduced the iPhone in 2007, Apple has released only one new model a year, relying on customer adoption of the latest design to stay ahead of rivals including Google, Samsung and Nokia. Apple has sold more than 244 million iPhones to date, not including the new iPhone 5, which was introduced by CEO Tim Cook at an event in San Francisco last week.After this week’s release in selected countries, Apple will start selling the iPhone 5 in an additional 22 countries on Sept. 28. Schiller said the goal is to offer it in 100 countries by year’s end. There are three configurations, starting at $199 and requiring a two-year wireless service plan.Apple is also continuing to sell the iPhone 4S, at a reduced $99, and the iPhone 4, which will be available for free, effectively positioning those designs “as the low-end model of the iPhone – a strategy which should help the company capture and defend market share from low-end Android phones,” Ben Reitzes, an analyst with Barclays Capital, said in a report today.
iPhone By the Numbers 

Gene Munster of Piper Jaffray said today that based on the better-than-expected number of pre-orders,  he thinks Apple could sell as many 8 million iPhones overall in the opening weekend — or at worst, just 6 million. Here’s what he says to say about his math:The reason we are confident in the 8 million is two-fold. First, initial 24 hour pre-orders for the iPhone 5 were up 100% y/y from the iPhone 4S. Last year, pre-orders accounted for 25% of total weekend launch unit sales. Assuming the same initial pre-order/retail distribution, the pre-order total would suggest 8 million launch units. Second, given the 2 million pre-orders, getting to 8 million units implies roughly 6 million additional units at pre-order or retail compared to the 3 million from the iPhone 4S, or 100% y/y growth. We are confident that demand for the iPhone 5 can be up 100% y/y given consumer reaction to the launch including our finding that sentiment around the iPhone 5 was 73% positive on Twitter compared to 51% for the iPhone 4S.Munster also did a comparison of early sales for Apple’s various iPhone iterations. It took Apple 74 days to sell 1 million units of the original iPhone after its release in June 2007. It then went on to sell 1 million iPhone 3 models in the three days after  its July 2008 launch. The iPhone 3GS, released in June 2009, won over 1 million buyers in three days, as well. Sales of the iPhone 4 hit 1.7 million in the three days after its June 2010 debut. The iPhone 4S, released in October 2011,  hit 4 million in sales after just three days.Bill Choi of Janney Capital Markets predict Apple could sell as many as 10 million new iPhones in the first week. Michael Walkley of Canaccord Genuity says iPhone 5 sales could reach 10 million by Sept. 29, the day Apple closes its fiscal year. Brian White of Topeka Capital, who says one-day pre-orders exceeded his estimates  of 1.3 to 1.5 million phones, says his prediction that Apple will sell 10 to 12 million new iPhones in September  may now be “conservative” given initial demand.Although the reviews on the device are not yet in, UBS analyst Steven Milunovich sought to counter would-be critics who say the iPhone 5 isn’t enough of a change in design to entice new buyers. “Some in the media are concerned that the iPhone 5 is too incremental—even the 4S had Siri. We would point out that (1) Apple sells only one current phone model, so it can’t get too crazy; in fact, maintaining the iPhone look and feel is important; and (2) the vast majority of buyers don’t get into the speeds and feeds the way the technoscenti does–LTE will be a big improvement for the average US user,” Milunovich said in a report today.iPhone users who aren’t ready to make the switch to the new device will still be able to update to the latest mobile operating system. iOS 6, which adds 200 new features including an Apple-developed maps program, will be available Sept. 19 as a free software update. The software will work only on certain models of the iPhone, iPad and iPod Touch players.

iPhone 5 Pre-order Sales Exceed Apple’s Expectation

Apple’s iPhone 5 is one of the most anticipated smartphone of this year. Demand for this particular smartphone was boomed when the first announcement of iPhone 5 pre-order. People are willing to buy this phone even though they have not seen the real phone they buy. This indicates that the demand for this smartphone is considerably high.

At the article, it is stated that iPhone demand exceed its supply at the day of its pre-order announcement (1 million unit). It shattered its predecessor’s sales  iPhone 4 . This indicates that Apple’s smartphone sales is growing over the years. Even though other brands like Samsung, HTC, or Sony released decent smartphone, it doesnt deter consumer to buy apple products. Instead, more and more people demand for Apple’s new released smartphone. Apple has shown a great sustainability in the smartphone market since 2007 when the first iPhone was released.

Since iPhone 5 demand is higher than its supply, it is most likely Apple will push it’s iPhone 5 production. Moreover, Apple may consider increase iPhone 5 price after iPhone 5 are released officially. The society interest towards iPhone 5 has exceeded Apple expectation of iPhone 5 sales probability, resulting in shortage. Pre-order is just beginning. Apple now can predict how the sales will probably increased significantly after the official release.

QS measures the quantity of iPhone 5 that it is supplied / available. Unfortunately, iPhone 5 customer is more than expected, so that demand is shifting to the right, and new equilibrium point at E2 is where are iPhone 5 sales actually are. Quantity demanded exceed quantity supplied and shortage emerged because the pre-order sales of iPhone 5 are exceeding Apple’s expectation. To cope with the situation, Apple have to take actions. One of the action that Apple will take most likely is increase the iPhone 5 price so that the shortage line will decreased and the new equilibrium point at E3 can be achieved.

Even though other platforms are releasing its smartphones too, why does Apple still at the top? Not only from regular Apple customers, but Apple also gaining customers from other platforms such as Blackberry and Android. The increasing demand in iPhone somehow makes a decline to other platform smartphone products. From my point of view, it may because iPhone 4 has sucessfully dominate smartphone market a year ago, and the iPhone 4 loyalist tend to seek the enhanced and perfected version of it. So that it is rational that people willing to pay much for a good branded, well known, and enhanced version of successful smartphone.

Gene Munster of Piper Haffray expect that iPhone 5 sales will reach 8 million at the week of its release. I dont personally think that iPhone 5 will reach that sales at the first week. The pre-order reach 2 million just because people want to brag for their new iPhone, considering majority of iPhone customers is teenage. Teenagers, especially in US, desires Apple’s products because of its design and simplicity, and they want to have Apple’s latest product immidiately after the release so that they feel sense of prestige in front of their friends who havent buy iPhone 5 yet. However, Apple’s iPhone 5 is being compromised by Samsung Galaxy S3. Galaxy S3 is the second most wanted smartphone after iPhone 5. People who have bought iPhone 5 and find it dissapointing (from what i have heard) will tell their relatives to buy Samsung Galaxy S3 instead. Moreover, there are smartphones from other platforms that may better than iPhone 5 as well like HTC and Sony. In addition, when Apple first published the specification of iPhone 5, Galaxy S3 sales are rocketed at that day as well. This indicates people’s disatifaction of iPhone 5 specification.

On the contrary, it is stated too in the article that iPhone 5 got a positive sentiment from society via Twitter. Sentiments for iPhone 5 are 73% positive compared to its predecessor, 51%. This indicates that iPhone is getting more and more favored by the society. However, in my opinion, the positive sentiment towards iPhone 5 is probably because they havent seen the real item yet. Moreover, positive sentiment doesn’t always mean they are willing to buy it. It may a merely praise to Apple’s latest products. They just follow the trend to talk about iPhone 5.

When speaking about elasticity, in my opinion, iPhone 5 demand is elastic. If the price of iPhone 5 grow, people still have many substitue of smartphone in other platforms such as Galaxy S3, Sony Xperia, Blackberry Dakota, etc. If Apple increase the price of iPhone 5, they will lose customers. Even though Apple is still number one choice of smartphone product, smartphone market is already developed. There are variety of smartphones to buy, and their specification is not far compared to iPhone 5.

In the article, it is said that analysts expect that many customers will line up for the phone at the day of its official release just to brag that they got it in the release day. They are holding on their purchases and already spare some of their income from the beginning of the year to purchase iPhone 5. However, this is not necessaryly means that iPhone 5 is the most advanced smartphone now. It’s because the branding effect. According to my friend, Apple’s products bring prestige to its bearers due to it’s simple and cozy design.

In conlution, iPhone 5 are  Apple’s key to dominate smartphone market. Apple have to find a way to maximize their profit by the sales of iPhone 5. Apple still in the top of smartphone market competition, and they have to sustain that position by constantly releasing new products that it is exceed other platform smartphones. iPhone 5 shows that capability. Even though Galaxy S3 is booming this year, many Apple’s loyalist still choose iPhone 5 despite its minor improvement from its predecessor.