If HP’s TouchPad flash sale didn’t make it clear enough to onlookers and analysts, the sales figures should. There is a market for non-iPad tablet PCs in spite of, and indeed because of, the continued phenomenal success of Apple’s iPad.
Demand for HP’s webOS device brought down the PC World, Currys and Carphone Warehouse websites in the UK, and saw queues forming outside US branches of BestBuy that rivalled those found outside Apple stores on the launch day of the iPad 2.
Our figures show that sales through distribution were up an astonishing 897 per cent in the week of the TouchPad price cut compared to the week before. That’s even more remarkable given that much of the stock actually went direct to retailers as part of HP’s go-to-market strategy.
Consumers are willing to buy tablets from well-known branded PC and telecoms resellers, provided the price is right. The joint TabletVU report from Context and CCS Insight demonstrates this aptly: preliminary results of new field research from CCS Insight suggest the brand remains the most important criterion for choosing a particular model for just under half of tablet owners.
And as we have seen from our numbers, sales will increase if the ASP falls. So vendors must be aware that Apple’s pricing means a significant number of people will buy an iPad. CCS Insight’s poll also suggests that, given that three-quarters of tablet owners use the device predominantly for browsing the web, a cheap tablet from a trusted vendor will fly off the shelves, as we saw in the recent flash sale.
No doubt the huge demand for the TouchPad was linked to its low retail price, a price meant to clear inventory rather than turn a profit. Yet the point is that vendors need to understand that competing with Apple on price point is not conducive to success because consumers will only purchase alternatives from already trusted brands at a lower price point.
Even though the quality of non-Apple products has improved dramatically over the last few months, it is difficult to sell a possibly heavier and slower tablet without considerable brand power.
Distributors are willing to overlook their natural reluctance to sell low-margin, high-volume products when it comes to Apple. The word ‘inventory’ may not even exist when dealing with Apple stock.
Our TabletVU data supports this: iPad sales have risen month-on-month since April, and the normally quiet month of July saw a 54 per cent sequential increase in iPad 2 sales across Western Europe.
Meanwhile, sequential sales of Acer’s Iconia Tab were stagnant in July and Asus saw an eight per cent decline, with a steady ASP. Combined sell-through for both vendors stood at 67,000 units in Q2. Another 37,000 were sold in July. Not unimpressive figures.
The cost of producing a tablet is about $300 (£190). As the margins of most non-Apple vendors are already very low, cutting the price of their tablets may be a difficult pill to swallow.
Acer, Asus and even Samsung know how to play this game very well, as we saw throughout the 2009 netbook wars. The question is: are vendors willing to accept the fact that rivalling Apple on price will not work on its own, nor will attempts at presenting their products as equivalent to the iPad?
Regardless of spec, the iPad, powered by the Apple brand (named the world’s leading brand in 2011 by brand research firm Millward Brown), will remain the natural choice for many, as our research suggests.
At the time of writing, there were some 42,000 posts on the Hot UK Deals website from buyers who were either seeking to get their hands on a TouchPad or conveying their displeasure at failing to do so. Yet £89 is probably not an appropriate price point from a purely business standpoint, so Apple’s competitors should focus on how they can tap into this reserve.
The TouchPad flash sale has indicated that there are masses of potential casual tablet users. Perhaps these users don’t need a tablet as such, but they will spend £200-£300 on a product that is convenient and available from a brand they trust.
Salman Chaudhry is a mobile computing analyst at Context
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