iPad competitors hamstrung by price point and content dearth

While the iPad continues to be a big success, the tablet market offers a harsher climate to vendors other than Apple — and pricing strategies may be an important factor in their difficulties.
Last week Motorola said it sold only 100,000Xooms during the third quarter, while Apple sold over 11 million iPadsin the same period. Meanwhile, Research In Motion sold just 200,000 ofits critically slammed PlayBook tablet between June and August.

So far, Samsung has been the most successful challenger, selling about1.6 million Galaxy tablets during the third quarter,according to data from market research company Canalys.

Predicted to outsell all other challengers — and possibly prove thepoint that price is critical to compete with Apple — is Amazon, whichhas seen such pre-order demand for its upcoming Kindle Fire that itdecided to ramp up production. The company is “increasing capacity andbuilding millions more than we’d already planned,” CEO Jeff Bezos saidlast week.

Kindle Fire has content, low price
What sets the Kindle Fire apart from competing products is its US$199price tag, combined with access to movies, TV shows, songs, magazinesand books. Today, products like the Xoom and Samsung’s Galaxy Tab 10.1originally cost more than twice as much as the Kindle Fire, and aboutthe same as the iPad.

“Tablets at high prices, meaning close to that of the iPad, are simplynot going to sell meaningful volumes for the foreseeable future,” saidRichard Windsor, global technology marketing analyst at NomuraInternational.

Neil Mawston, director at market research company Strategy Analytics,agrees: “Pricing is critical for tablets. Apple can charge a premium,but very few others can,” he said.

Amazon slashing its price to the bare minimum has driven growth,whereas Motorola, HTC and others have tried to maximize pricing andthat has backfired, according to Mawston.

Also, Hewlett Packard’s fire sale of the TouchPad,slashing prices from $499 to $99, following its decision to withdrawwebOS hardware, demonstrated that pricing is a critical factor indetermining success, according to Canalys. The company ended upshipping 560,000 units, Canalys said.

But pricing isn’t the only factor. The weak user interface on Android Honeycomb, the OS that is used on current Android tablets, hasn’t helped, according to Roberta Cozza, principal analyst at Gartner.

Amazon has added its own user interface to Android.

Also, the tablet is mostly about media consumption, so you need contentand applications to attract users, Cozza said.

“The user experience on Android simply isn’t as good as it is on the iPad, and you don’t have all ofthe applications and access to the content Apple is offering,” saidWindsor.

Apple seen as the ‘safe brand’
The way people view the tablet market also puts many vendors at adisadvantage, according to a survey of 4,500 tablet owners in Europedone by market research company CCS Insight.

Almost half see the tablet as a new product category, which means thatbrand is very important, and Apple is now seen as the safe brand,according to CCS Insight mobile analyst Martin Garner. Also, almost onethird see the tablet as part of their computing set up, and that is badnews for phone vendors like HTC and RIM, Garner said.

To turn things around, the Android camp has a lot of work to do.

“It needs pretty hardware designs; more developers to develop tabletoptimized applications, services and websites; and Google to develop amore tablet optimized browser and operating system, which it has donewith Android 4.0,” said Mawston.

Google is taking steps to move inthe right direction, but perhaps not moving as fast as it would like,according to Mawston.

RIM needs better design
RIM also faces an uphill battle.

“The first thing it needs is more attractive hardware,” said Mawston.

Besides that it also needs more attractive pricing, better messaging,an improved application store and more of a focus on the consumer, hesaid.

Despite current challenges most vendors are likely to stick it out. Theexpected sales volumes are too big for them to just throw in the towel.For example, on Thursday, Motorola launched the Xoom 2 and MotorolaXoom 2 Media Edition. In October, the company also launched the XoomFamily Edition, which costs available for $379.

If vendors get tablets right, the category is still expected to play abig role in the future of computing, with end users performing agrowing number of tasks on their tablets, according to Garner. Heexpects more “proper competitors” to the iPad to arrive next year.

Garner isn’t alone in thinking that products launched next year willhelp redraw the tablet map.

“In 2012, we can expect that established vendors will launch lower costtablets, as well. If there is a significant price gap to the iPad, thenmaybe there will be some users that just want a good browsingexperience. But I still think vendors will need strong content andservices,” said Cozza.

Samsung’s products have been doingbetter than other Android-based tablets, but nowhere near as well asits smartphones. However, as the company continues to improve itsproducts, volumes will also grow, Mawston said.

Next year will also see the launch of Windows 8, which will be used onboth PCs and tablets, and turn the tablet market a three-horse racebetween Apple, Google and Microsoft, and supporters of the latter two,according to Mawston.

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