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The Tablet’s Taboo: How A Lack Of Connectivity Will Cripple Adoption

3/24/2011 03:39:00 PM

The debate on who makes the best tablet is a hot topic these days, especially after the recent releases of the Motorola Xoom, Samsung Galaxy Tab, the Hewlett-Packard TouchPad and Apple’s iPad 2. The pundits, gadget geeks and investors are pouring over features, price and usability, yet seem to skirt one very crucial issue — connectivity. And this is not just because of the increased functionality it provides consumers, but for the opportunities that it offers vendors.

Think about all the recently revealed tablets, both those featuring 3G connectivity and Wi-Fi-equipped models. The 3G-equipped Motorola Xoom is already available at a large number of U.S. storefronts, including Best Buy and Verizon Wireless. And, if you have recently paid a visit to Staples, OfficeMax or even Kmart, you would not have missed the 7-inch Samsung Galaxy Tab. But where are new non-cellular equipped tablets? You might want to check Fry’s Electronics and e-commerce resellers, and that’s pretty much it! Unless it’s a Wi-Fi-iPad, it’s hard for non-cellular tablets, even from tier one vendors, to gain availability in this widely competitive tablet market, but those with mobile broadband capabilities have a major advantage of an added channel for greater exposure.

Samsung is a great example and is well-positioned as both a mobile and PC vendor, but it made the wise decision to take its Galaxy Tab to the market through its cellular providers. Samsung, whose Galaxy Tab is available at 10,961 US retail locations in Gap Intelligence’s tablet panel, revealed that the company played a direct role in the tablet’s placement only at Best Buy, and beyond that, the device’s saturation in the U.S. retail channel is a result of its four wireless carrier partners.  In addition to their own locations, wireless carriers such as Sprint and Verizon negotiated to place the Galaxy Tab in stores such as OfficeMax, Staples, Costco, Fry’s, RadioShack, Ritz Camera and Kmart. Now we know that one does not typically go to Ritz Camera or even Kmart for a tablet purchase, but hey, while you are there you’ll probably check out the tablet.

This means wireless carriers are essentially doing the legwork for tablet vendors. As a result, Samsung has a 17 percent weighted shelf share of Gap Intelligence’s tablet U.S. retail panel, and Motorola zoomed to a 2 percent share just one week following the launch of its Xoom tablet.

There is a lot of chatter about Apple’s price advantage, which is true when you compare the suggested prices of cellular-equipped tablets with similar iPad configurations, but this is not telling the whole story. A cellular-equipped tablet is often sold with a huge discount when bundled with a contract, thus significantly reducing the tablet’s net price and making it more competitive. For example, the 7-inch Galaxy Tab with its recently reduced $499 suggested price looks expensive in comparison to the entry-level 9.7-inch iPad that also sells for $499, but the Galaxy Tab offers stronger competition to the iPad, when priced as low as $249 through a wireless carrier with a contract. Of course, Apple can also offer its iPad with a discount through cellular carriers, but the company’s enormous brand strength allows them to sell without promotions.

There are two groups entering the tablet market: smartphone vendors and PC manufacturers.  Based on the industry’s early market share leaders, it is clear that the mobile phone vendors are benefiting from their relationships with wireless providers, at the expense of the PC vendor’s sales of both notebook and tablets. With that, I believe it is vital for PC vendors to embrace the product and channel strategies driving the tablet market and offer their tablets with broadband capabilities.

About the author: Gurpreet Kaur is a market analyst for Gap Intelligence, a San Diego-based independent technology research firm with emphasis in helping product manufacturers and retailers understand current retail market trends in order to respond to customer demands as they occur. She can be reached at gkaur@gapintelligence.com.  

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