New York — The Anti-Defamation League’s National Consumer Technology Industry divisio
All the tech blogs and pundits are beating their drums about the potential launch of the iPad 2 on Wednesday.
Assuming that is what this event will introduce it would be much more worthwhile to concentrate on what is really important to the future of the iPad, and the tablet category in general. To-date all we have heard are the typical pronouncements and concerns about new processors, thinness, or what the screen resolution is. While all these elements are important the most important things to concentrate on for the long-term success of tablets are pricing and distribution, both of which are discussed minimally at best.
Let’s start with distribution.
The iPad has been lightly distributed for a product that sold around 12m units in the U.S. in 2010. As Apple talks more about small businesses and the iPad opportunity in enterprise it would be great if distribution focus was expanded to include more business-oriented channels like the office stores and the DMRs, such as PC Connection and Insight. Those chains and resellers offer Apple real chances to gain incremental volume versus shoveling a couple more units through the carrier stores or adding another Web site. Although, even in its consumer focus, Apple’s distribution clearly needs to expand into more regional CE outlets and test more alternative distribution opportunities like department and home stores, such as Kohl’s or Bed Bath and Beyond.
Distribution will be interesting, but pricing will be critical. Every tier one PC, phone, and TV OEM will have tablets on the market by July. By my count that is probably something on the order of 20 SKUS from tier one brands with high consumer familiarity, and retail savvy with lots of retail partnerships. But there is no way there is room on the shelves of America’s retailers for that many tablets. The fight for shelf space is therefore likely to be vicious as we head into back-to-school and the holiday season. And robust shelf space competition inevitably leads to one thing: Price Wars.
With that in mind it will be interesting to see whether the new iPad comes with a new low price. Since Apple tends to keep the same ASP for the life of a product, if Apple launches iPad 2 at the same prices as the original iPad is sold for today they will clearly be absorbing some risk that other, presumably high-quality, tier one branded product, could be selling lower at their launches at $299, or even lower prices during the holiday.
Since Apple never responds to that type of price activity the key to iPad 2’s announcement will be whether today’s price holds or Apple is the first one to shoot off a canon in a tablet price war. So forget about specs think price, think distribution, as those are always the attributes that make products, even Apple’s, successful not DRAM, GHz and mega pixels.
Stephen Baker, Vice President, Industry Analysis for The NPD Group
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.