iPhone anomaly: Most cell phone buyers pay under $50
More than half of the cell phones U.S. consumers bought this spring cost them less than $50, a statistic that shows the masses remain hungry for cheap phones.
According to NPD Group, 28 percent of phones consumers purchased in the second quarter were free after rebates and promotions, and another 28 percent cost less than $50. Just 11 percent of phones cost more than $150, and 4 percent more than $250.
"Carriers and wireless specialty stores accounted for the most sales of higher-priced phones and are key to driving advanced functionality," said Ross Rubin, director of industry analysis for NPD. "By comparison, mass merchandisers and department stores sold a higher percentage of phones priced at $50 or less, which can help to expand the market via pre-paid options."
The numbers also show that Apple (AAPL) and its touch-screen, media-rich iPhone are swimming against the tide. The iPhone starts at $500. Apple executives say they expect to sell 1 million of the devices by the end of September.
In general, cell phone retail sales in the U.S. remained strong in a seasonally slow spring. Consumers snapped up 33 million handsets, NPD said, for sales of an estimated $2.4 billion. The number was up 14 percent from a year ago.
Most of the sales – 62 percent – came through the stores of dominant carriers such as Verizon Wireless (VZ), AT&T (T), Sprint (S) and T-Mobile (DT). Big-box retailers and department stores contributed 9 percent, and specialty stores 5 percent.
Of course cheap phones are hot. As long as they are offered folks will buy. The US is a country of cheap abundance; quantity not quality; sizzle without the steak; service without the customer in mind.
It's all about our economy and volume, volUME, VOLUME!
not much options out there — look at the crap motorola is producing, especially from a software perspective. Add to that Nokia going with Microsoft (why, i still figure it out)… nothing there worth putting your life on that will fit in your pocket other than iPhone… maybe a smaller one coming out soon? 
Why is everyone bashing the iphone these days for being too expensive? Why is it so important to grab every chance to say the iPhone isn't selling well or isn't working well? I don't get it.
The iPhone is just a much better product then the $50 phones; you just can't compare them. So you can't compare the sales numbers either. Maybe all these $50 phone people are buying cheap phones now so they can save money to buy an iPhone in the near future?
Like all the other Apple products, the iPhone is a little expensive. But people are still willing to buy them because Apple products make them happy; because it's worth the money. Also, in business more and more people are finding out how much more work they can get done if they're not staring at blue screen 80% of the time.
People seem to think technology should be $59 and appeal to everyone but no one expects you all to buy a $9,000 car.
The iphone like most Apple products is NOT priced for Everyone. If you get it, like it or even need it – great – buy one.
Some people hate the iphone like Apple bought up 5 competiting cell companies and no more low cost/free option. Apple is merely offering another choice – the same people who whine about the Apple being overpriced (especially here) are the same people who'll spend $700 on dinner or spending $4k to go fishing. It's a phone. It's a choice. If you don't need or want one or woudl rather spend $500 on shoes, great – step away.
BTW, the iphone is when distribution matches marketing – hence, the moeny is going into APPLE's pockets and not eBay sellers – Apple is smart – what's the point of eBay hype? Does that increase revenue or does that annoy regular paying customers who want to walk into a store and buy one. Apple got the hype AND the revenue.
And over 80% of iphone users are happy – the next best, Blackberry's at 50%.
As some here have pointed out, the iPhone is not merely a phone. It is an awesome video-playing iPod, a pocket computer with cellular network and WiFi internet access, an email device, a web-browsing device, etc. If one understands and uses the product, you will see that it is actually quite a bargain. The idiot comparisons between the cost of an iPhone and a regular cellphone are akin to comparing the cost between a car and a bicycle. What next? "Mercedes an anomaly in China: most Chinese prefer spending 100 wan on a bicycle." By the way, cars are getting more popular in China by the day. As people realize the advantages of one machine over the other and understand what they are purchasing, they move to the new technology. (By the way, the Chinese fake iPhone, the "iPhoney", pales in comparison to the actual iPhone, despite the iPhoney having a removable battery. The Chinese iPhoney is the Zune of handheld communication devices… just another poor copy of an original idea.)
It's not so much an anomaly. Cell phones have become like cars, for instance. The majority of people will by affordable and economical ones. However, there will always be a market for Mercedes cars because many people who can afford them are willing to pay extra for luxury and distinction.
To "No More FUD": you are wrong. "Most people" use an average of 13,000 minutes. Who among us doesn't use his phone 8 hours per day, 24/7? I think it would be better yet if you could get 10,000 minutes a month with unlimited data for $1.99/month. Until then, you are absolutely dead-on right: this iPhone is nothing more than a "peice of brick." P.S.: Business 2.0 should make you their editor. The rest of the inmates and I like your keen intellect.
"think about the rate plan that you must sign for 2 years @ $60 only to get 450 mins.Most people use on average of 1000-1500 mins per month"
1) Most people want SOME cell service; if you're not on ATT, you're on another carrier, anyway
2) I don't use close to 450 minutes. But if I have an iPhone, I'd be surfing the web with it, for sure.
The I phone is the biggest rip off of the season. Only if you figured out that the cost of this phone is not $5-600. Think about the rate plan that you must sign for 2 years @ $60 only to get 450 mins.Most people use on average of 1000-1500 mins per month thos plans are expensive and if you sign the basic plan the over charge that these big companies charge $.45 per minute will cost you more than what most people are willing to spend. The I-Phone can't do anything unless you sign up for service, its nothing more than a peice of expensive brick. It would be good if you could get the thing and sign up on T-Mobile where they offer you 1500 mins for $59.99 plus unlimited data for 19.99, and consumers would have a choice of service. Now you are stuck with one carrier and if you don't like there service than tough, or if they want 500-750 dep than too bad for you.
Keep Apples with Apples and oranges with oranges.
You must compare the purpose of the device. The reason so many people want 'cheap' phones is because the just need a phone to text or make calls.
The iPhone is a tool, and as such should be only compared to other tools (Blackberry, etc.).
What is the total price of ownership. Price paid per phone, plus monthly fees.
Get off the "you still need to sign a two year contract".
If you have one of the tools, you will be using it on someone's service, and most people only switch services when they want or need a new phone, or the existing service ha sucked for the last time.
In case you hadn't noticed, ALL carriers suck at some point.
The truth is MOST PEOPLE want free phones….But you dont see mot ericy nok getting banged by "a%&holes on the street.com" keep drinking the kool-aid folks and thank sillybilly gates for marketing it to you…Oh that reminds me—how many shares did he sell last month ????
My dream —a sillysoft free world..
No more waiting and HUGE data crashes..GET A MAC
And how much is the total cost? Most of those $50 phones you speak of are heavily subsidized and you pay for them out of the service contract. If you choose a Motorola "Q" then it costs you $150 more than an iPhone for the phone and two years of service.
Yes, you pay more up front with an iPhone but you pay less for two year conract. The iPhone is much better than a Motorola "Q." When you replace your phone at the end of your service contract, as most people do, then you still have an iPod, instead of a doorstop.
Apple and ATT are swimming in unsold iPhones, while production is being scaled back. eBay is full of iPhones, at a discount, including many used iPhones from dissatisfied buyers. Just wait until the customer non-replaceable batteries start to die. The iPhone is the next Lisa, in my opinion. Calling the iPhone a "computer" is naive. Apple has ventured into a market they have no business entering. Time will tell. The stock is taking a bath for a reason, and it's not the overall market..
Don't forget to subtract the price of a Nano from the iPhone. Why does no one do this? Once writers finally acknowledge this math, THEN they can begin to subtract for the price of a notebook computer, since that's what the iPhone is. With Wifi (FREE), the iPhone customer can now get rid of his Nano AND his notebook computer. Subtract those two little items from the $500-600.
The iPhone is the bargain of the century, and Apple even negotiated the monthly data fee lower than any other smartphone to date.
Expect MASSIVE sales pre Xmas, and it will get better as people begin to understand the value of this device.
People keep confusing the iPhone for regular cell phones. Even Steve Ballmer, when he first saw the iPhone and said "$500 for a phone???", was confused. The iPhone being a phone is secondary to everything else that it does. It's an iPod, a Web browser, an email device, a cool touchscreen and oh yeah, it does phone calls too.
Anyone in the market for a "cell phone" who just wants the ability to make basic calls should get a free phone or cheap phone because it suits their needs. No one is pretending that those people should be spending more for an iPhone, nor is Apple saying they have to buy one. It's an option for someone who wants or needs the extra functionality and is willing to part with the extra cash.
I just love how analysts (and Ballmer) love to compare the iPhone to other expensive "Smart Phones" when it comes to comparing functionality that they feel is essential to any Smart Phone (always picking and choosing features the iPhone doesn't have, of course) like 3G network access, corporate push email, having a physical keyboard, etc. but in the same breath, they compare its price to free and sub $50 phones that look and work nothing like a Smart Phone. That, my friends, is called a double standard.
Have you ever heard an analyst compare the latest Blackberry's price to the latest "free" simple phone from LG? If you are going to compare the iPhone to other Smart Phones for functionality, then compare its price to the same $200 – $500 (subsidized or non-subsidized) Smart Phones as well.
While the phones may seem cheap or free, they are nothing more than enticements that gide the additional costs hidden in the service agreements.
That is why services like Metro PCS sell their phones for higher pei we but the service is cheap.
The iPhone may seem like it costs more but in actual point of fact is not.
jf: Except for the fact that new AT&T customers still have to do a two-year contract to get an iPhone, right?
"More than half of the cell phones U.S. consumers bought this spring cost them less than $50, a statistic that shows the masses remain hungry for cheap phones."
All the stat shows is that more expensive phones have, so far, not been worth spending more on.
The way i see it is that apple products is mainly marketed at rich suckers, hey! they don't care what it cost if it looks kool, they'll buy it just to be the first one to own the product or to be carrying it to tv interviews and showing it off. most of you guys are right the iphone is not for everybody only the ones with the benjamins. the iphone should be bought for the other functionalities not to be use as a phone, because the phone utilities sucks big time according to a friend. the iphone to me is just like the PS3 too pricey, but if there are suckers willing to pay for it then the marketing groups are doing a good job for getting at least a small group of consumers. later on there will be a price drop and it will be affordable to an average consumer like myself, not interested though. no need for me to go wait outside the store one day before just to be the owner of an iphone or PS3, those people are morons, I'm talking about the people that take the day off from work just to go and wait in line to purchase the damn product. peace and love to everyone.