Release of new smartphones draws crowds, but investors are worried that high prices will leave Apple a niche player
Shoppers are queueing overnight in London's most popular shopping districts – in the rain, in sleeping bags and on folding chairs – not for the opening of the Harrods sale or a new Primark branch, but to become the first owners of Apple's latest iPhone.
On Friday morning, the makeshift camps will be packed away as Apple opens the doors of its Regent Street and Covent Garden stores for the arrival of not one, but two new handsets.
As the gadgets go on sale in nine countries, Apple is venturing into new territory by offering its followers a choice: the slightly lower-priced 5C, in its colourful plastic casing, or the top-of-the-range 5S, with a fingerprint scanner and a souped-up camera.
But for most of those who spent a night shivering on the pavements of central London, there is only one phone that matters – the 5S.
"I prefer to buy the better one, not because it is more expensive, but because of the speed, the display, the finger scanner," said Noah Green, a 17-year-old London student waiting outside Apple's flagship Regent Street store.
Under the porticos of Covent Garden, where the shelter helped draw a larger and less damp crowd, a group of Norwegians sat huddled around their phones and tablets. "It doesn't come out in Norway until December," explained 33-year-old Stig Martin Fiska.
His group of friends and colleagues flew to London on Thursday, and will head back straight after making their purchases. They admitted that Apple had lost some of its lustre. "It's lacking a bit of magic now," said Fiska. "But they are still the best."
With the arrival of the iPhone outshining the Harrods Boxing Day extravaganza as one of the most reported events of the retail calendar, the annual queue is also an opportunity for marketing and money-making.
Max fisher, a 17-year-old student from Hendon, was being paid £100 by a developer to wear a T-shirt advertising their smartphone app – and was enjoying the camaraderie. "It's a great experience in itself," he said.
For Michael Roberts, an estate agent from Surrey and number three in line at Regent Street, the plan was to sell his place in the queue. "I've already had an offer – £7,000," he told technology website Pocket-lint. "He's some rich guy from Dubai. We exchanged numbers and he said he'll be back tomorrow morning."
For Apple, the new devices will help Silicon Valley's richest company reach $90bn (£56bn) in revenues from smartphone sales this year, pushing its overall takings to $170bn, according to Bernstein Research.
Apple's products remain desirable, and it boasts nearly 50% market share of all the phones sold for more than $300, but the company's insistence on high prices is limiting its ability to reach new customers. Investors now wonder whether Apple will eventually become a niche player in the market it invented in 2007, as it loses share to Samsung and other manufacturers using Android software.
Shareholders and shoppers had hoped that the iPhone 5C would be cheap enough to become Apple's first mass-market handset. But it costs almost as much as its top-of-the-range sister model. In the UK, prices start at £469 without a contract, just £80 less than the 5S.
Mobile network owners, who sell more phones than Apple's stores thanks to the subsidies they offer in exchange for two-year service contracts, said this week that pre-orders were significantly down on previous years.
Only one model, the cheaper 5C, has been available to buy in advance. One network said pre-orders had been just 10% of those achieved by last year's iPhone 5. Networks said there was high demand for the 5S, which could sell out due to initial supplies being constrained.
Ronan Dunne, chief executive of O2 in the UK, added his voice to the debate on whether or not Apple has produced yet more bestsellers on Thursday with a tweet saying: "5C only part of equation – 5S key". He suggested the flagship model could sell out, saying O2 had the "same supply as everyone else, but will it be enough is the key question".
Sales of the iPhone 5 surpassed 5m in their first week, Apple revealed last year, and with its successor models available in more markets including China from day one, demand will be higher than ever.
"We will get the same level of excitement and buzz that we have with the normal launch of an Apple phone and they will sell out quickly," predicted Gartner analyst Van Baker. He added that the fingerprint scanner might be to blame for supply constraints. "We are hearing they are having a hard time getting the fingerprint sensors produced. The carriers in the US say their allocation on the 5S is very small."
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