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Apple’s mcommerce push not enough to boost iPhone’s shrinking role

iPhone 5C

The iPhone needs a bigger screen size

Perhaps the most exciting news to come out of Apple’s new iPhone introduction yesterday was a built-in fingerprint scanner. However, overall the iPhone 5C and 5S launches lacked the kind of breakthrough news needed to pull Apple out of its current slump.

The new Touch ID fingerprint security significantly streamlines user authentication and has the potential to make Apple a much bigger player in mobile commerce. On the other hand, the new iPhone 5C falls short of the low-cost device that was expected, meaning Apple still faces a shrinking role as high-end sales begin to stagnate.

“This will keep them going at their current rate,” said Michael Morgan, analyst at ABI Research, New York. “I don’t expect this to create some unforeseen jump in sales.

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“There is always going to be a jump in sales when they come out with a new device but this is not going to really push them to a whole new plateau of distribution,” he said.

“The fingerprint scanner I think is going to be a big play down the road.”

Lower cost phone
Sales of higher end mobile devices, where Apple has traditionally reigned, are slowing while sales for lower-priced devices are growing rapidly.

As a result, Apple’s role in the overall smartphone category has been shrinking.

At the same time, Apple is also increasingly under pressure at the high-end as Samsung devices continue to gain steam.


The new iPhone 5S

With this macro-trend in mind, many analysts had expected Apple to come out with a low-cost phone.

The new 5C does and does not fit the model.

While it is less expensive – by $100 – compared to the new iPhone 5S, the $99 price tag is still not low enough to likely make much of an impact on emerging markets.

“The 5C is what would have happened to the 5 when you bring out the new device,” Mr. Morgan said.

“They haven’t really created a low-cost device here,” he said. “They have just taken their device, moved it to plastic and called it new but it is still the old one.

“I don’t see that as having a material effect on their approach to the low-end market.”

A touchy subject
While Apple did say the iPhone 5C will be available in China, an expected announcement of a partnership with China Mobile was not made yesterday. However, a second Apple event is taking place in China today, where the company may have more news about its plans for the country.

Apple faces a significant challenge with trying to address the growing smartphone middle and low-end segments. For example, the iPhone 5C could end up cannibalizing sales of the iPhone 5S.

Touch ID uses biometric fingerprint security and is built into the home button for the new iPhone 5S. The goal is to offer users an easier way to secure their phones without the need of a pass code and to access their iTunes account.

Multiple fingerprints can be recognized.

Touch ID could also conceivably be used to authenticate a user for the purposes of completing an online purchase. The potential significance of Touch ID lies in its ability to streamline the mobile purchasing process.

“What is interesting is that it can now be used for logging into anything as well as making mobile purchases,” Mr. Morgan said.

“It is sort of removing that having to type in your password barrier, having to log in barrier,” he said. “Just removing some of the friction in making that happen – I think that is going to be interesting going forward.

“It is going to be just that much easier to buy something with your phone.”

More bits
While no retail integrations were announced at launch, there is no reason why Touch ID could not be made available to retailers through an API, per Mr. Morgan.

However, without an NFC integration, which Apple did not announce, Touch ID would not work for in-store purchases.

The lack of an NFC announcement from Apple is another blow for the technology, which had once been considered a shoe-in for mobile payments dominance but has been slow to catch on while other authentication systems such as QR codes have gained steam.

The big news is a new 64-bit chip – a first for a smartphone – that will enable it to process more data at faster speeds.

“Apple is certainly offering meaningful innovation here,” said Tony Cripps, principal device analyst at Ovum, London. “Moving to a 64-bit architecture means Apple can genuinely claim to have brought something new to the smartphone party.

“It should certainly help the company further cement its lead as a mobile gaming platform and will give the Android fraternity something to think about in a space whose significance is sometimes downplayed beyond the gaming world,” he said.

Wearable devices
In addition, the iPhone 5S will have a motion coprocessor focused on taking real-world data about users’ movements and translating it into useful information for users such as how many steps they have taken in a day. It is not clear if this is Apple’s answer to competitors such as Samsung introducing smart watches with similar capabilities or precursor to its own smart wearable device.

The iPhone 5S will have also have an improved camera and will be priced at $199.

Apple also announced the release date for the latest update to its mobile operating system, which is Sept. 18. The details of iOS 7 were revealed in June.

“The big things they announced were the improvements to the camera, which to me is really this incremental improvement to keep pace with what’s happening,” ABI Research’s Mr. Morgan said.

“It is tough to say if the co-processor is an enabler to enable wearables or if is a defense against wearables in the sense, if you have all this stuff happening and it is on your body, do you still need to purchase a fitness band,” he said.

“On the other hand, the fitness band could now be tasked with displaying the information and not so much collecting it. It can go either way.”

Associate Editor Chantal Tode covers advertising, messaging, legal/privacy and database/CRM. Reach her at chantal@mobilemarketer.com.

 
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