Discount Grocery Stores in Austria Will Start Selling iPhones
Can Apple cultivate a luxury brand when it’s hawking discounted gadgets next to toilet paper?
When the Apple Watch hits stores on April 24, the high-tech jewlery will be showcased in swanky department stores such as Selfridges in London and Galeries Lafayette in Paris. Before then, you’ll be able to buy Apple products for the first time at a chain of discount grocery stores in Austria, once considered by locals to be a place for “only the unemployed.”
The iPhone 5C will go on sale starting next week at Hofer, the Austrian supermarket known for carrying no-name products at rock-bottom prices. The 5C is Apple’s cheaper, plastic model, with 8 gigabytes of memory, which is half of what’s in the entry-level iPhone 6. While Americans can typically get the 5C for free with a two-year contract, Apple sells an unlocked version for $450 in the U.S. that can be used on any carrier. Hofer says it will sell the unlocked 5C for €297 ($313)—about €30 less than what it costs at other Austrian electronics shops, according to data compiled by Bloomberg.
Selling through a bargain-basement grocer is a somewhat strange development for Apple, which traditionally maintains a tight grip on where and how its products are sold. As Apple gears up to release a line of high-end watches, having an Apple display next to the yogurt aisle or a sale on 12-pack toilet paper isn’t ideal for cultivating a luxury brand. The Apple Watch was recently featured in a 12-page spread in Vogue China magazine, and the company has teamed up with fashion model Christy Turlington Burns to promote the product. The starting price for the gold Apple Watch Edition is $10,000.
Hofer, a subsidiary of the German retailer Aldi, has sold low-price smartphones and tablets made by Samsung Electronics, as well as Lenovo’s Motorola and Medion brands. Hofer says this is the retailer’s “first cooperation with Apple.”
Like Apple, the grocery company is trying to appeal to a wealthier clientele than it’s used to. In the 1990s, Germans lined up in the streets for a chance to buy off-brand discounted computers. Over the years, Aldi has slowly added branded products and organic food. The transition has helped Aldi shed its image with many locals as the store where “only the unemployed” go to shop, says Wolfgang Richter, head of RegioPlan Consulting, which advises Austrian retailers. He says the potential for Apple to profit from Aldi’s huge customer base outweighs any risks to its perception as a high-end brand.
Apple could protect its premium reputation by selling only cheaper products at Aldi and other discount grocers, says Hans Engel, an equity analyst at Erste Group in Vienna who covers Apple’s stock. “Aldi is a solid chain and has a wide reach,” Engel says.
“You won’t find the newest iPhones or the expensive MacBook Pro there. High-end clients will still feel comfortable in knowing that you don’t get the iPhone 7 or 8 at Hofer.”
If Apple’s foray into discount retailing in Austria succeeds, Aldi could offer a route for expansion. Aldi Süd, the part of the corporate empire that owns Hofer, has branches worldwide, including 1,360 locations in the U.S., 560 in the U.K., and 360 in Australia, according to its website. Wal-Mart Stores in the U.S. and Tesco in the U.K. carry iPhones today. Anke Scholz, a spokeswoman for Aldi Süd, said the company currently has no plans to sell iPhones in Germany, and she declined to elaborate on other markets. An Apple spokesman declined to comment.