Tablets: difficult to swallow?


Much has been spoken about the tablet market, both good and bad. Michael Garwood takes an in-depth look at this new multi-billion-pound market

It’s been more than a year since Apple chief Steve Jobs stood before journalists and unveiled the iPad tablet. But despite the initial fanfare, opinions on the market remain downbeat at best.

Speaking to the mobile channel, it is clear that despite a year passing and a number of high- and low-end devices already on the shelves in scattered markets, including Toys R Us and Next, the levels of uncertainty from the channel prompts more questions than answers regarding the viability of selling tablets.

Perhaps the biggest question of all is which segment the devices fit. Business? Consumer? To date, the collective and majority view is the latter, with devices seemingly focused on multimedia services such as movies, music and browsing the internet.

The first-to-market devices iPad and Samsung Galaxy Tab, (current market numbers one and two) are firmly in the consumer end at present.

Follow-up devices from Apple and Samsung (iPad 2, Galaxy Tab 10.1) as well as new entrants from manufacturers including LG (Optimus), HTC (Flyer) and Motorola (XOOM) have all been perceived by industry personnel as more consumer-focused.

Tough to market

So what about the B2B channel? The BlackBerry PlayBook, launching in the next couple of months, is expected to focus on the enterprise market and to take share from Apple and Samsung, based on its existing 28 per cent UK market share.

HP (the world’s biggest electronics company) is to enter the tablet market this year, using its cloud-focused webOS operating system. It has caused stirs of excitement in the channel, with Brightstar and Data Select already signing up.

But today, when asked, be it a distributor, operator or dealer, no-one seems certain to what a tablet is for. Which makes it difficult to market.

Despite this, the outlook for the market should not be ignored. According to analyst IDC, tablet sales in 2010 topped 18 million and it expects this figure to more than double to 50 million in 2011. It claims tablet sales more than doubled in Q4, to 10.1 million tablets.

It further stated sales of the iPad accounted for about 15 million units in 2010, with Samsung, which launched its Galaxy Tab device in September, selling about two million.

However, many argue the purpose and need of a tablet cannot be deduced by Apple sales alone, due to overwhelming customer loyalty to its brand. Nick Dillon, Ovum analyst for devices and platform, joked Apple could release an iToaster and it would lead that market.

The most ambitious forecast comes from Gartner, which expects total tablet sales to treble to more than 55 million, while Ovum and CCS Insight are predicting 40 million.

US-based RBC Capital Markets valued the market at $70 billion (£44 billion) by 2014, with sales topping 185 million units globally. Ovum told Mobile News it forecasts sales to top 150 million by 2015.

Underwhelming demand

However, despite the positive forecasts success in the UK at least, appears far from certain.

Despite the market’s infancy, horror stories have surfaced of stock going unsold and prices having to be cut significantly.

Sources close to distribution claim major network operator Orange and supermarket chain Tesco have already been stung by tablets, having attempted to predict the strength of the market.

There have been rumours Orange placed orders of about 2,000 Galaxy Tab devices to sell through its retail channel, but sold just 50 in the opening fortnight. Speaking to staff in retail stores, including Orange, T-Mobile, Vodafone, O2 and Three, tablet sales have been minimal.

Tesco is understood have been hit the hardest, having set out a strategy to become the ‘home of the tablet’, in November. It was expected to announce three tablet brands, but signed just one, again the Galaxy Tab, ordering 15,000 units.

It is claimed some of the stock from this original order still remains today.

The Samsung Galaxy Tab has also been subject to a price war among retailers, including HMV, Tesco, PC World and The Carphone Warehouse, which saw the price of the device drop by half in some instances.

Back in November Mobile News noted that distributors were offering the Galaxy Tab device for a trade price of £480 excluding VAT. But at the same time Tesco was selling the device for £469 including VAT, making it “impossible” to sell, some said.

Since then prices have plummeted further, with Tesco currently charging £360 and PC World £341.

Uncertainty means stock orders from distributors have been minimal, it’s claimed.

Poisonous stock

20:20 Mobile purchasing and marketing director Andrew Peat says: “Six months ago we sat down and said we need to get involved in the tablet market quickly and become experts. But within two months we were saying not in a million years are we touching this stock, after what happened with the Galaxy Tab.
“The bottom line is there are not too many places you can go out and buy a tablet – outside an Apple shop.No-one is willing to take the first steps, and to my knowledge none of the distributors are taking a gamble  right now.”
Another source in distribution, who wished to remain anonymous, added: “Tesco got absolutely taken apart by the Galaxy Tab, which is a very good device. It purchased 15,000 units and sold very few.

Orange purchased a few thousand and within the first two weeks had sold around 50 of them. When you combine its poor sales and issues with price control, it immediately become a product with a reputation.

“It just dented everyone’s confidence. I actually think there is demand out there, but I don’t think there is a buyer in the market willing to place a significant order on the basis that you could look very foolish.”

Full article in Mobile News issue 486 (April 11, 2011).

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