Why Advance Ordering An iPhone 4S Can Be A Trap

I spent yesterday creating and then updating our Planhacker guide to iPhone 4S pricing, on a busy day which saw Telstra and Virgin Mobile announce their iPhone 4S plans and Vodafone release details of its 12-month contract offers. The big lesson for consumers from that experience? Advance ordering a phone before you know the full competitive landscape could be a costly mistake.

Apple started taking advance orders for the unlocked iPhone 4S last Friday, and within 24 hours had moved from saying it would ship phones on October 14 to saying there would be a one or two week delay on shipments. Optus followed on Saturday night with details of its contract plans, and Vodafone wasn't far behind.

More: •Planhacker: iPhone 4S Australian Launch Pricing Compared

Having a shortage of supply has always been part of Apple's strategy; it makes its phones seem more desirable, and ensures that there'll be people queuing for store openings, in turn guaranteeing an interesting image for TV news broadcasts. It also has the effect of making many people sign up as soon as they spot a plan that looks suitable, rather than waiting for all the facts.

But this is not the ideal way of getting yourself the best deal for a phone, whoever it is from. For instance, if you had been contemplating signing up with Vodafone — say because it has the cheapest plans with unlimited domestic calls and you use your phone as a phone a lot — you might well have signed up on Saturday, concerned that otherwise you'd be waiting a long time for a new device. At that stage, you would only have had the option of a 24-month contract.

Had you waited until Wednesday or beyond, you'd also have had the option of a 12-month plan. True, the overall handset charges would have been higher, but if you don't want to be locked onto a handset for a full two years, that might have been an appealing choice.

Optus did reveal both its 12 and 24 month plans on Saturday, but even then buying straight away might not have been sensible. If you wanted an "unlimited" plan, Virgin's Topless deal is slightly cheaper than Optus' equivalent — but we didn't know that on Saturday.

I suspect many buyers had already decided in advance that they wanted to sign up with Telstra, which merely meant waiting until Telstra revealed its pricing. Right now Telstra doesn't wholesale its mobile network, so there wouldn't have been any alternative choices. But even in this scenario, knowing what rival carriers are charging is useful information even if you ultimately decide that network reliability is your main consideration.

The important lesson? If you're buying a phone on a 24-month contract, you're going to have it for a long time. Better to wait and have all the facts, even if that means a delay in getting the device you want, rather than ordering early just to be the first person on your block testing Siri.


Comments

    couldn't agree more

    Correct me if I'm wrong but optus preorders are not a binding contract are they?

    I placed online order on Applestore on 7th and today it still says as "Ships by 14th". i ordered this for my girl....hope i get it before she leaves Ausi :(

    http://dl.dropbox.com/u/31941197/VJ_iphone4s.PNG

    "Having a shortage of supply has always been part of Apple’s strategy; it makes its phones seem more desirable, and ensures that there’ll be people queuing for store openings, in turn guaranteeing an interesting image for TV news broadcasts."

    What utter rubbish!!!

    People that got their pre-orders in as soon as they were available are still getting their phones shipped on the 14th. Order times of 1-2 are now simply the result of initial stocks on hand being exhausted.

    And as to ensuring people queue outside their stores for openings, well once again Apple has a finite amount of stock on hand that has to be dispersed across hundreds of stores world wide, so of course it's not going to be possible to equip every single store with more units than there is demand for. Is you local new car dealer doing the same thing when they say there's a 6 week wait on delivering your new car????

    I'm not even an Apple fanboy and this is still the most ridiculous statement I've ever read on LF.

      Why not - other companies predict demand accurately. This is their fifth release. They could have the stock on hand if they wanted. Make no mistake about that.

        Being able to predict demand and being able to meet that demand with a physical product are two completely different things.

        Devices take time to produce, check, ship, distribute, etc, and, believe it or not, for each of these steps Apple relies on a cohort of different companies along the way. When a product takes more than a million pre-orders alone on the first day you can hardly expect any company to be able to saturate both the online and retail store demand.

        Anybody that expects Apple or any other electronics company to have a unit on hand for every single customer when they want it wherever they want is an absolute moron.

        People such as yourself Thom are clearly allowing a preconceived disliking for Apple to skew their perspective.

          Personally I wouldn't be surprised if the reason the iPod touch didn't get a new processor is because Apple anticipates needing every A5 it can get its hands on for the iPhone for the next few months.

      You must be joking.

      Between the delay from the usual June launch to October, using the same basic case they’ve been building since June 2010, and the use of the same chip as the iPad 2, they've had the capability to build a very large initial stock for months. Apple didn't wait until October 6th to start building these things. They sold 1.7 million in 3 days with the iPhone 4, so even if they assumed the same demand as for the previous model, they knew what level of supply would be required to meet it, and could have done so, particularly as they had at least some parts on hand. They didn't, because as has been pointed out, limited supply is part of their marketing strategy.

      It's a fairly common business practice - DeBeers have been doing something similar with diamond supply for decades. Apple will have studied very carefully what price will maximise their profits on the demand curve, and set a relatively inelastic supply at that mark. They'd be mad not to. If they set supply higher, they'll get a diminishing return. They don't even have to worry about being accused of monopolistic practices (as opposed to the iPad), as the process is demand-driven in this case - there's plenty of competition, but people want an iPhone.

      It's got nothing to do with like or dislike of Apple, but the assumption that they have a grasp of basic market economics, and a desire to maximise profits. I'd be worried about them if they didn't do this.

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