Wal-Mart Stores said on Friday it will start selling Apple's iPhone on Sunday, but the popular cell phones that can surf the Web will not be priced as low as some anticipated.

Wal-Mart plans to sell the black 8-gigabyte iPhone 3G model, which also holds about 2,000 songs, for $197. The 16-gigabyte model, in black or white, will be priced at $297. All of the phones require a new two-year service agreement from AT&T or a qualified upgrade, Wal-Mart said.

The move gives Apple the chance to reach millions of Wal-Mart shoppers who may not be as familiar with the company's products.

Wal-Mart typically appeals to a lower-income group of shoppers than those who buy Apple's Macintosh computers, iPods and iPhones, which are typically more expensive that other PCs and music players. But the world's largest retailer has also lured new customers seeking low prices in a recession.

Wal-Mart used discounts to draw in millions of cash-strapped shoppers during the holiday season. It was among the first to advertise its deals this fall, including hot electronics such as flat-screen televisions.

Numerous websites had previously speculated that Apple would offer a 4-gigabyte model of the iPhone for $99 at Wal-Mart stores. But the phones being sold at Wal-Mart are the same ones already on the market, for about $2 below the prices offered at other locations.

AT&T, the exclusive U.S. wireless service provider for iPhone, currently sells the cheapest version for $199 for a model with 8 gigabytes of storage, and $299 for the 16-gigabyte version. AT&T declined to comment.

Keeping the Traffic

Wal-Mart was one of few U.S. retailers whose sales fared well in the weeks after U.S. Thanksgiving and it is trying to keep shoppers coming back to its stores after Christmas. It ran a commercial on Friday morning showing a mother taking her son to Wal-Mart to spend the gift card he got for the holiday.

While the commercial did not refer to iPhones, it did show the pair heading into the electronics section of a Wal-Mart store.

Wal-Mart's move may put pressure on Best Buy, the largest consumer electronics retailer. Until now, Best Buy had been the only retailer besides Apple's own stores and AT&T stores selling the iPhone.

Best Buy currently the 8-gigabyte iPhone on sale for $189.99 and the 16-gigabyte version for $289.99, each priced $10 less than their usual price at Best Buy.

Wal-Mart also said its stores could match local competitors' advertised prices during a promotional period.

The phones will be available in nearly 2,500 stores beginning Sunday, December 28.

Apple posted a stronger-than-expected 26 percent rise in fiscal fourth-quarter profit in October, spurred by strong sales of the faster, next-generation iPhones. Apple sold 6.89 million iPhones during the quarter, which ended on September 27.

Shares of Apple rose 81 cents to $85.85 in morning trading, while Wal-Mart rose 2 cents to $55.46. Best Buy was flat at $26.70.

Back to CIO Insight