This morning Apple announced that it sold only 5m iPhone 5’s in the first three days. And the stock sold off 14 points on the “disappointment.” That’s what I call free money.
Apple disappointed investors because they don’t have enough iPhone 5 supply to meet buyer demand. That is an excellent problem to have. However, an investor acquaintance of mine said that he was disappointed by Apple, noting that they’re planning on rolling out the iPhone 5 in 31 countries by Friday, and they obviously didn’t allocate enough supply to their home country. (This presumes they are withholding some supply for the upcoming Friday launches in 22 countries, which should be correct.) He thinks they underestimated initial demand, but this presumes that they’d even want to fulfill that demand.
My explanation to him is below:
You’re thinking about it from an investor’s standpoint. Sure, a blockbuster # would be great for the stock, but is it what Apple wants? Do they want an iPhone in the hands of everyone who wants one as soon as possible?
No, they don’t. They want shortages, they want users to have to wait in line, they want people pining for that phone which will show up in 3-4 weeks. They want people to have to wait in line or wait at the door for FedEx. Suffering/pining for something binds you to it emotionally. They want the perception that the iPhone is a scarce object that confers high status. They want people to long for their product.
As an example, I live in DC and I was eating at a trendy restaurant last weekend. My girlfriend and I popped in without a reservation so we ate at the bar to avoid the line. As yuppies are wont to do, everyone had their phone out on the table in front of them (lest they miss something for god’s sake.) Towards the end of dinner, I mentioned this to my girlfriend and we both had a chuckle at their inability to unplug. I also noticed while all the phones were iPhones, none of them were iPhone 5s. To see the reaction, I took mine out and started playing with it. Everyone around us noticed, and it was immediately the subject of conversation for at least two groups near us.
What other object can stimulate this admiring/wanting tittering? A Ferrari? The nicest house on the block? Some of those people probably have iPhone 5s on order or are saving up for one, and their hearts were wanting while their brains were dreaming about the day it shows up on their doorstep.
That’s what Apple wants, not putting a phone in the hand of everyone who wants one on the first weekend. That would do nothing for long term sales. The emotional experience is what will help sell 200m iPhone 5s over the life of the product.