Wal Mart $99 iPhone - who's the big winner?

The latest big rumor with respect to the iPhone is the $99 4GB version from Wal Mart.

I think that this will take place for two reasons:

1. The slowed-down economy needs money somehow. By selling at more accommodating prices, people will spend money.

2. Reducing the iPhone's price from $399 to $199 made the iPhone available to more users, who couldn't afford something at double the price, so by reducing it further, it opens things up to more customers. Especially as a sub-$100 solution.

In such a scenario, Wal Mart, Apple, and AT&T would be the ones benefiting. But who's the real big winner in this case?

Apple wins because their units get pre-sold to Wal Mart, and they get more than $99, because of the carrier subsidy.

AT&T wins, but not right away. They have to pay out the money for the carrier subsidy first, and any revenue they make off of this (as it would in any case) is residual, and therefore, not guaranteed, as there can always be the deadbeat client who signs on just to get the iPhone, but never pays their bills.

However, in my opinion, Wal Mart is the biggest winner of them all.

Why?

Of course, they are the only thing that stands between the customer and the iPhone, so they get the money, and sign anybody who buys one on for the necessary plan or plan upgrade, and earn the associated commission with that, as well as the profit for the handset itself.

Like with any electronic device, the bucks aren't made on the device itself - they're all made on the accessories, such as the cases, screen protectors, speakers, car chargers, etc. - all of which cost pennies to make, and can be sold anywhere from $9.99-$29.99 each.

Looking around on the WalMart site - I see cases for as high as $48.60. Given the fact that I see iPhone cases in lots at around $0.99 per case on eBay (not as good quality, but not the point) - I've got a feeling that even that high end Griffin case, didn't even cost $1.00 to make.

Packaging, shipping, profit, etc. all factored in - at the absolute minimum, Wal Mart is likely tripling on this - which would mean that their cost is $16.20.

Let's say this does take place - and Wal Mart successfully sells one million iPhones, and half the buyers purchase cases. Even if they made only $10.00 per case - their gross profit would be $5,000,000.00 on cases alone. Then there are car chargers, extended battery packs, charging docks, extra chargers, headphones, and speaker systems. All of which are accessories to the iPhone, and would increase in sales as a result of the $99 iPhone's release.

Additionally - customers who may not necessarily frequent Wal Mart, might just come in there to get their iPhone that they thought they'd never have at such a price. Then they might notice a sweater that they like. That ottoman would look great in the living room too. Check out that price on that LCD tv! You know, I've always thought about getting a new one...

A full shopping cart and an empty wallet later, they're heading out to the car.

Wal Mart has a tendency to do that to people. By getting more people in there to do it to, it only makes them more money.

What's my point in writing this post? Invest in Wal Mart. Should this $99 iPhone deal go through, they will experience immediate, substantial gains.

Talk about a sneaky hidden market!

As a Canadian, if I was paid for a deal in US cash, I would find it to be somewhat exciting. Not just because of the fact that the US dollar is worth about 125% of our dollar, but because it's a real change of pace - and I happen to love it down in the US and it reminds me of there. Also, we work on a basis of dollars that are of comparable value - so the currencies are somewhat interchangable.

What about other forms of currency?

Some forms that we have no idea as to the value of, such as the Malaysian Ringgit, the Japanese Yen, the Ghananian Cedi, or the Guyanese Dollar, would be completely foreign to us - and although they might carry value that can be converted into Canadian dollars - you have to watch out. That 100 on a Japanese note you see is about $1.08 US - so it should not be thought to be anything like a dollar.

So, where am I going with this?

Having bought a small set of Mongolian currency from a flea market a few years back for $5.00 - I thought I'd look up what the total value of the notes inside was.

There was a 10, 20, 50, and 100, totalling 180 units.

Compare that to Canadian Dollars - 180 Mongolian Tugriks = $0.154593 Canadian Dollars

At the $5.00 that I paid for it - this guy made $4.85 off of me - multiplied his investment 32.3 times!

At only five of our dollars, it's an amount one would not really think twice about. But if this guy sold 50 of them in a day - he'd have himself close to $250.00 in profit.

This is a very doable business, too. Nothing is that difficult about ordering foreign currency from the bank, having it arrive a few days later, and you packaging it up, and selling it at a flea market, on eBay, or wherever.

Think aobut the possibilities for customers - there could be the little kid who wants to get started in currency collecting, and his mom sees a $1,000.00 bill from Guyana (which is only about $6.00 Canadian - and less than $5.00 US), and a couple of cents' worth of other notes, in a package for $15.00 - just imagine the look on her son's face once he gets a $1,000.00 bill!

There could also be the upcoming birthday. Someone is looking around in the mall for a birthday gift for his brother. His brother loves to travel the world. Why not grab him some foreign currency? Gives him the foreign experience from home. You spent $2.00 on the notes - and charge him $10.00 - and you made $8.00.

On small amounts like these, where it's the idea of having the foreign currency, as opposed to the amount being in question, people will buy on impulse. They won't go on Google to check the value/exchange rate.

It's perfectly legal - and it exploits something very subtle that people might not pay attention to.

Even if you get exposed for it - for small amounts of money, it's not worth someone's while to have to go to the bank, order currency, wait for it, and pay them a premium anyway. I guess you, as the business operator, save them that hassle.

That's my two Canadian cents' worth.