Electronics companies have long shaped their businesses around the mantra, "Make it faster, better, and cheaper than the next guy."
It shouldn't come as a surprise then that this exact scenario is starting to aggressively play out in the still fledging but already heated tablet market, where everyone and their mothers seem to be diving into the unknown and trying to win a piece of the action.
What comes as a bigger surprise is that the company starting the price war isn't even your traditional electronics enterprise. It's an e-commerce company with global market muscle.
Last week, Amazon.com Inc. (Nasdaq: AMZN) shouted a battle call in the direction of Apple Inc. (Nasdaq: AAPL), and hinted at the idea that the skirmish might be won via some combination of price and customer experience. Apple has since fired back. It introduced the iPhone 5 this week and cut the price of both the newest device and most of its predecessors. What this implies is a possible price cut for the next-generation iPad.
During the official product launch, Amazon CEO Jeff Bezos announced that the new Kindle Fire HD 8.9-inch tablet with 4G would sell for $499, which syncs up to the base price of an Apple's iPad. The WiFi-only model comes in at $299, and the 7-inch, 16 GB one with WiFi at $199.
Widespread commentary about Amazon's move to better position itself in the market points to a general market strategy that pits price right up against customer experience. And, even if Amazon's first version of the tablet had some lackluster reviews, the latest product suite appears to rectify earlier shortfalls.
As ReadWriteWeb lays out in detail, Amazon takes a "Sell Now, Make a Profit Later" approach, and Bezos emphasized that the company wants to align with customers (at a more competitive price point) and will make money after the initial hardware sale when consumers use the device. Apple, however, sells products at a much higher price point, which means it counts on making profits on its hardware rather than the services or apps its sells after the fact.
MarketWatch also points out that Amazon isn't only going to bat with Apple; investors see Amazon's tablets directly competing with Microsoft's upcoming Surface tablet and Google's new Nexus tablet.
As in the smartphone market where Apple and Samsung (via Google's iOS) are slinging it for market share, the tablet sector is looking to become a horse race with a handful of players charging forward and a bunch of secondary players picking up the scraps. Gartner forecasts that media tablets sales could reach 119 million units in 2012, up from 60 million units last year.
Meanwhile, in the secondary market, even a big-box toy store wants in on the potentially lucrative tablet segment. This week, Toys R Us said it was launching its own $150 version for kids, including WiFi connectivity, extensive parental control features, and 50 pre-loaded apps. And, as a side note to the competitive picture of the smartphone market, Amazon may not have announced its smartphone plans just yet, but there is all sorts of chatter about it being a possibility somewhere down the line.
With the field still open and consumers still deciding where their loyalties lie, each major company in the field is putting a stake in the ground. In a few quarters, we should see which strategy took the gold medal home.
Jennifer, the point I raised is a valid customer voice. I had purchased a Samsung tab 620, which is a onetime investment and there after every month am paying a good amount to the service provider for availing various services. When I brought my Tab, I never realize that the data package and other services can burn my pocket this extends.
Jacob - that's a good point... the choice of which device is fairly easy -- people will likely make an initial hardware/tablet choice either on brand loyalty, promised features or price. But how they use it afterwards and the kinds of services/apps they want could also begin to sway the hardware vote.
Bolaji, I agree, generally. One would think there would be a decline in Apple's hardware prices, but, luckily for Apple, people have been willing to pay the price for "cool." But, eventualy, all cool becomes "so yesterday." Yes, pricing could well split the market, but if compeitors don't come up with an equally-hyped up and great-looking electronic toy, maybe price will only go so far.
Anandvy, most of the customers are looking for services rather than procuring the device. The procuring cost is a onetime investment and there after monthly tariffs like burdens. So any bundled packages (call/Data) along with the devices are more attractive for both customers and service/device providers.
Can Apple inhibit on Amazon's growing wings in OEM sector? I dont think anyone of the rivals is strategically placed enough to stop Amazon's free flow into consumer markets. Microsoft? May be. The truth is that - Amazon would dominate both software and hardware markets soon.
As per USB port --- I dont see non USB port embed as a flaw or an oversight of design. Apple may try not to put all its eggs in one basket.
Jenn, I wonder, will lower pricing change the market share structure in favor of Apple rivals? Many of them have tried this strategy without success. What's different now?
Jenn, That's why I can't wait for the Microsoft tablet. I believe it will integrate more PC-like functionalities than the Apple style tablet, which I believe is flawed.
You are right, the inability to be able to use a USB device on tablets is really a major disadvantage and this is a reason why most consumers will keep their PC for a long time
@TaimoorZ - yes, Amazon may be exploring a diversification stratgey for its Western markets, but the market for e-readers is far from dead, I think.. In classrooms in the developing world, for instance, e-readers present a simple technology solution for a massive problem: Put books into the hands of teachers and students who otherwise wouldn't have access to books, in a relatively low-cost/affordable way.
As a disclaimer, I work with Worldreader, a non-profit bringing Kindles to Africa, and right now we're in Ghana, Kenya and Uganda. It's extraordinary how those single-use devices are changing lives, and I would think that developing world represents a huge opportunity for Amazon still.
Natural disasters wreak havoc to the tune of $100 billion in annual damages, says a UN report. To cope, companies need improved risk management strategies.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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