Wal-Mart Sells Refurbished iPhone 6 at a Discount

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Without a lot of fanfare, Wal-Mart Stores Inc. (NYSE: WMT) has begun selling a refurbished iPhone 6 with 16 gigbytes of memory for $399. That’s a $150 discount to the phone’s list price of $549 at the Apple Inc. (NASDAQ: AAPL) website and the same price as a brand new iPhone SE.

Or it would be if Wal-Mart sold the iPhone SE at the list price. But Wal-Mart dropped the price on the new phone  to $299 on April 1 and will sell the phone at that price for three months.

But we digress. Besides being a refurbished phone, the Wal-Mart iPhone 6 is locked to the AT&T Inc. (NYSE: T) network. The iPhone on the Apple website is unlocked. The discounted iPhone SE at Wal-Mart is available from AT&T, Verizon and Sprint.

What, exactly, is a refurbished phone, or computer or tablet? The definition can be squishy, but virtually all definitions refer to a product that was shipped to a customer and then returned for some reason. Often that reason has nothing to do with whether the product was damaged or wouldn’t work, but a lot to do with the customer’s ability to figure out how to use it. No matter — even if the box is unopened, the product cannot be sold as new.

Apple sells refurbished Macs, iPads and iPods at its website, but not iPhones. Here’s what Apple says about its refurbished products:

Before we put a refurbished Mac, iPod, iPad, or Apple TV up for sale in Special Deals, it undergoes a rigorous refurbishment process to make sure it’s up to Apple’s tough quality standards. We back it with our standard one-year limited warranty. And you have the option of purchasing an AppleCare Product for it.

Where is Wal-Mart getting the refurbished iPhone 6 phones that it is selling? And why doesn’t Apple sell refurbs?

Apple’s sales and profits are driven by the iPhone, and to maximize those profits Apple wants to be the gold standard among smartphone makers. It does not want to undercut its own prices and latest products with discounted versions of phones that have been returned. But customers have to be returning iPhones to Apple, so the company has to have somewhere to get rid of them.

It’s a cinch that Wal-Mart is not refurbishing its own returned iPhones, so it has to be sourcing these phones from somewhere. And if the source is Apple, then Wal-Mart probably is paying a price that still allows the retailer to make a (small) profit on the sale. Apple gets to maintain its gold-plated image, and Wal-Mart gets to offer a hot product at a discount. A classic win-win situation.