The Digital Skeptic: How Apple Sells High-End, Mass Market All At Once

NEW YORK ( MainStreet) -- Sitting here in the Galleria at White Plains' far-too-vast food court after a stout morning of iPhone shopping, it's time we all admitted the truth. While the high-end Apple ( AAPL) brand remains safe and sound, Cupertino has clearly polished itself up into a heck of discount mass-market retailer.

Go ahead. Call me old fashioned, but I cover Apple "old and in the way." I ignore the Web leaks, rumors, keynotes and ads and wait for real products to come to real stores. Then I hop on my bike, head down to the retail suburban outlets here and shop for Apple gear, just like everybody else.
The supposedly for-high-end-only Apple iPhone is really as aggressively priced and marketed as any phone on the market.

And ahead of the looming iPhone 5 release -- and its attendant wave of nonsense -- I figured it was time for a fresh look. Lo and behold if a new business model has not sprung live from the head of new CEO Tim Cook.

Yes, the fat-margin, unique shopping experience of Apple is still in full effect. But also, very craftily, this company has baked in a mass-market multipoint discount play -- one that on many levels rivals what any other mass maker (like, say, Motorola ( MOT), LG or Samsung) offer.

Here's why.

Apple divides and conquers at retail.
The secret to Apple's split retail identity is simple: It divides the shopping experience among different outlets and, in effect, offers a high- and low-end brand simultaneously. Just follow along in today's iPhone hunt. I started out this morning over at the spiffy, lux Westchester Mall, where a full-on, top-shelf Apple Store flogs the usual pricey MacBooks, iPhones and iPads. Yup, that really is about $4,000 for a desktop computer. Yikes!

But even here, Apple's mass-market upside lurks. The iPhone 4 I want, -- not the state-of-the-art 4S, but still a perfectly good model -- can be had with a contract from major carriers such as Verizon ( VZ), Sprint ( S) and AT&T ( T), for $99.

Which made me wonder: Could there be a deeper market in discounted Apple goods elsewhere in the retail chain?

Target makes a perfect spot for APPL.
I hopped back on my bike and headed over to the Target ( TGT) outlet at the White Plains City Center Mall across the road. There, in the back, behind the food and women's lingerie, is an iPhone 4 similar to what I saw at the Apple Store -- but for just $49.99, again with a carrier contract.

Now, get ready for this: The sales staff offered to kick in trade-in cash on the value of my existing phone on top the $50 list price. Basically letting me get that iPhone 4 for free! Not bad.

The Shack coughs up the value.
But wait, there's more. I jumped back on the bike and headed here to The Galleria's RadioShack ( RSH) -- and sure enough, a iPhone 4 similar to what I found at Target and the Apple Store can be had $49.99 with a similar buy-back option on my current phone. But the store manager said he would kick in a $40 contract credit with Verizon and give me 4GB of data access for the price of 2GB of data.

Now I am not only getting a free phone; I am saving $280 over the life of my contract. Poof, the supposedly for-high-end-only Apple iPhone is now as aggressively priced and marketed as any smartphone on the market. Never mind the price, just add up the retail touchpoints. Between RadioShack and Target, we are talking thousands nationwide.

A big market makes Apple golden
Look around and you will see Apple as mass retailer makes a lot of sense. First off, for good old-fashioned profit, there's nothing better than this kind of late-in-the-design-cycle device discounting -- it moves products that have long since paid for themselves. Even at these low prices, each incremental sale on an older iPhone is pure bottom-line gold for Apple.

Not surprisingly, Apple is getting dang good at pioneering these discount channels. Best Buy ( BBY) was offering $100 off an aging MacBook Pro this week here in town. And Leap Wireless ( LEAP) announced that the iPhone will be a pre-paid option later this year.

The big-investor think, therefore, is some much-needed refreshment to today's grim markets. Apple has managed to be a high-end brand that commands fat margins, communicates like no other company on earth yet still offers deeply discounted products to hundreds of millions worldwide. Wow.

How they do it, who knows. But for investors sick of watching this or that digital flameout, this company really lets you get to bed at night.

An Apple a day really does keep the digital doctor away.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.