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19 November 2012

A ‘not so merry’ Christmas for Apple


By Jason Cross, Incentivated

It looks like size does matter as tablet sales are set to rise dramatically this Christmas. Microsoft, Google, and Amazon have all released tablets in the last couple of months; models that are smaller, cheaper and catching up to Apple in the features, services and content ecosystems they provide.

Reviews for the Google Nexus 10 praise its design and hardware, suggesting that Apple ‘finds itself with serious competition at last.’ Kindle Fire, the first Amazon tablet available in the UK, has been praised for its 1200x800 HD display – ‘it’s a corker’ - and its ‘tempting price.’

So, how does the new iPad mini stack up? It’s still good, but in areas such as display quality, it ‘falls short of Android rivals’ Google and Amazon. Windows Surface’s ease of use is a big plus, with one reviewer arguing that ‘No other tablet makes it as easy to get to work straight out of the box. No other tablet has its broad compatibility with a range of peripherals.’

Jason Cross blog post

The big question of course is how does this translate to tablet sales? iPad 4 and mini still currently dominate with a reported 3 million sold (globally, it should be noted) on opening weekend, although from there it gets a bit confusing. Apple have yet to announce how many of these units are iPad 4 units and how many are iPad mini, or even whether this figure may include iPad and iPad 2 tablets, leading some to question just how successful the smaller product’s launch had been. The much shorter Apple store queues post-launch were also noticed.

The Kindle Fire has also reported record sales, not on its own launch date, but on the day after the iPad mini’s launch event. So it seems buyers waited to see what Apple had in store, and that the price was a deal-breaker, giving us a large clue about the contents are most likely to be for the boxes inside the wrapping paper on Christmas morning.

Google and Samsung Galaxy devices are Apple’s biggest competitor, with sales causing Apple to drop to 50% of market dominance in the US already. Nexus 7 is probably the biggest competitor and when comparing iPad mini directly to other 7 inch tablets, it has better specs, a lower price, gorgeous displays, and can be used one handed.

The success of the Windows Surface debut is less obvious, as Microsoft refuse to reveal sales figures. What is clear however is the company’s decision to adopt the same strategy as Apple – with a 53% higher profit margin than Apple makes on the iPad. This is opposed to Amazon and Google’s 13% and 16% margins respectively, effectively selling at cost with the aim of making money in the long run through sales of apps and content. The fact that these companies have been able to release sales figures more quickly and in a clearer fashion would suggest that this is the approach winning over customers in the current economic climate.

Increased competition means that Apple’s approach will need to change if they want the iPad to remain the dominant tablet in the market – the difference between tablets and MP3 players is that the competitors this time around are selling not just the plastic but the content environment to go with the device. Dominating a marketplace with the more expensive device will be a much harder ask than it was for the iPod, as competitor’s have learnt Apple’s lesson well.

The number of smaller, cheaper alternatives is increasing and will prove the more attractive purchase in the run-up to Christmas. As the capabilities between tablets become increasingly narrow, customer focus will become less about the hardware itself and more about the individual services, apps and convenience that they can provide.

ComScore and OFCOM have shown that tablets were owned by about 11% of the UK population in the middle of this year. It is entirely likely that this will break through the 20% barrier by January 1st – assuming the various manufacturers can maintain supplies in the next few weeks. To a degree that may well depend upon how many markets these various devices are currently available in. Which again, may play into the smaller, Android devices hands which have a more concentrated geographical spread relative to Apple this year.


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