The Tablet Wars: More Makers Join The Search For The Pricing Sweet Spot

The iPad starts at $499. While most every device maker has mimicked Apple's price point, none have been able to mimic Apple's sales. At last count, Apple had sold 28.7 million iPads, making the iPad the clear industry leader. Now competitors in the space are realizing that in order to keep pace with Apple, they'll need to lower their prices. Significantly.

No company is better evidence of this trend than HP, which, after lowering the price of its TouchPad tablet by 80%, to $99, instantly saw sales figures rocketing. (Analysts estimate the now-discontinued TouchPad could soon be the second best-selling tablet behind the iPad, and HP has since decided to extend manufacturing of the TouchPad through the end of October.) Other iPad competitors must follow suit and understand that while $99 is on the extreme low end, there is no way they can ever compete with Apple on retail shelves with the same price tags hanging from their devices.

"There is only one credible player and category leader--and that is Apple's iPad," Trip Chowdhry, an analyst Global Equities Research who specializes in the tablet space, told Fast Company recently. "We don't see any second player at all--only leftovers."

Indeed, Chowdhry estimates that of the millions of tablets that have been shipped from companies such as Samsung, Acer, BlackBerry, and Motorola, only about 10% to 15% of them have actually been sold--a paltry sum compared to the iPad. For example, before dropping its price to $99, HP had reportedly only sold roughly 25,000 units at Best Buy. Another recent report suggests Samsung has sold only about 20,000 of its Galaxy Tab devices. A Toshiba spokesperson pitching a story involving "Thrive's success" in the tablet market declined to provide any actual evidence or numbers behind the claims of success. 

The only answer to dismal sales has been to lower prices. In addition to HP, which dropped its price from $499 to $399 before initiating its last-ditch sales effort, Motorola slashed the price of the Xoom tablet significantly, and BlackBerry recently cut the PlayBook's price by $150. Other tablet makers are heading in a similar direction, and delivering devices that are less expensive. Lenovo will soon unveil a 7-inch IdeaPad for $199, while Gateway is set to introduce a Honeycomb slate for $399.

The industry's great hope is Amazon, which is said to be working on a set of tablets in the range of $250 to $300. Forrester Research analyst Sarah Rotman Epps, who estimates that Amazon could sell anywhere from 3 to 5 million tablets in their first quarter on the market alone, has indicated that such a price range could be a sweet spot for tablet competitors, allowing them to differentiate their products from the iPad enough by price to make up for any sacrifice in quality.

With that diverse offering, the tablet market would now have devices priced at all ends of the spectrum, from the extreme low ($99 TouchPad) to middle ($199 to $300 tablets from Lenovo or Amazon) to the competitively priced ($399 to $499 tablets from companies such as Samsung and BlackBerry) to the extreme high (e.g. HTC's $700 Jetstream tablet).

How consumers will respond to this market is uncertain. Would you ever buy a tablet priced competitively with the iPad? What is the true sweet spot that a competitor would have to hit in order to attract your attention: $299? $199? $99? Or would you never purchase a tablet other than the iPad?

[Image: Flickr user Chiot Run]

Add New Comment

6 Comments

  • Loren Berg

    To answer the last question; for me to choose anything other than the iPad there would have to be a demonstrable improvement on the iPad interface and availability of useful apps. A difference of $100 or even $200 will not do it.  Amazon's entry into the market will undoubtedly expand the market as it will have the availability of apps and brings the tablet to the market that is more price sensitive.   Lets face it, for the average person that uses a computer to surf the web and handle email the tablet is a replacement for a notebook computer.  It brings all of the functionality they need in a compact, and more importantly, easy to use format.  Think of the difference in purchasing a new computer and it's setup and purchasing an iPad and doing the same!

  • Prasanna Srinivasan

    The approach the android manufacturers must use is not to target design lifestyle conscious users. There is a far larger market for those who do not want the fancy that apple provides, but want a tablet to do their job. 

    So, instead of trying to compete with apple on lifestyle products, they should be targetting the enterprise market (non-apple folks).

    Going by our experience in talking to our customers, they are looking for tablets to get the job done and think that ipad is an overkill whose fascination with design and aesthetics will wear off on a day to day utility basis.

    To achieve this, they must price the product way below that of Apple. Im guessing some where around 200-300 range. 

    Anything more than that should fall into the lifestyle market for which the aesthetics better be good enough to compete with apple.

  • adam hutchison

    look at laptops: Mac books are $1200, similarly spec-ed PC laptops are $600-700. That is it. Half of Apple's price is the point, assuming same level of useability and service.

  • Wize Adz

    "The iPad starts at $499. While most every device maker has mimicked Apple's price point, none have been able to mimic Apple's sales."

    Like Apple's other products, the iPad is a special luxury good.  As such, it's a poor indicator of a regular tablet should cost.

    A tablet is a reduced-functionality computer.  It lacks an integrated keyboard and a full software stack and interface -- but you get small size, portability, and a simplified interface.  A fully-functional computer (a netbook) can be had for a little under $300.  Therefore, the real price-point for tablets is a bit under $300.

    Tablets reduced baggage (in many senses) do allow new applications.  For instance, I'm thinking about replacing my car stereo with a GPS-enabled 7" Android Tablet and a car-audio amplifier.  It's roughly the same size as the double-DIN opening in my dashboard, and it would be a very smooth way to add a navigation/entertainment system to my old 12-year-old car.  Suddenly, my old beater car has a better in-dash navigation/entertainment system than any new car on the market today, and tech-envy is no longer a reason to get rid of a perfectly good transportation appliance.  All of the other applications that people normally think of for tablets (such as a mobile clipboard for medical professionals) apply, too.

    At a $500 price-point, there's no way that the hype about tablets replacing conventional computers doesn't pass the sniff test -- unless you're so well off that a few hundred dollars doesn't matter to you.  At a sub-$300 price-point, it's possible that tablets could become a disruptive technology (with respect to conventional computers), but there are a lot of practical details about how tablets and PCs work together as complimentary tools that make this unlikely.  I don't buy the narrative that tablets are replacing computers -- it's impossible until the price comes down, and even after that, they're different tools for different jobs.  The analysts are confusing the maturity of the PC/laptop market with obsolescence.  If they were more practical and less pundity, they would sit down and see what kind of work people are doing with each tool, and conventional PCs/laptops are far better for a lot of work-related tasks than a tablet -- so they aren't going anywhere.  Tablets will sell like hotcakes, but won't make the PC obsolete -- and PCs/laptops/convertibles will become smaller and lighter over time until it may be hard to tell the difference.

  • Nicholas Spittal

    This article is missing the forest through the trees - price is not the issue with iPad alternatives. The reason the iPad is outselling all other tablets is because of the far superior user experience and the breadth and quality within the AppStore. The iPad is easy to use, its fun, its apps cover the gamut of anything you could want to do on a tablet and the experience is rich. No competitor comes close to this and until they figure that out, the evidence is clear that price is irrelevant. HP's decision to continue production of a product for which they have no intention of providing long term support simply because it has sold well at fire sale prices is comical and the user base will fade nearly as quickly as HP's sales have gone up. 

  • Piplzchoice

    It is interesting that every new entry is touted as the iPad Killer, very few are coming anywhere near to the Apple's quality of design and execution, but yet almost every one prices it at the same level. The HP TouchPad implosion has a lot less to do with the product or the market-IMO it is internal corporate change in course that caused it. The tablet and OS faith was sealed months before the product was launched. However it's lesson is extremely valuable. The TouchPad got a lot of negative publicity but many customers
    who purchased it, published hundreds of glowing reviews of their experience.
    Our online marketing research shows that it is leads in customer satisfaction
    in comparison with other offerings. You can see the evidence by following this
    link http://blog.amplifiedanalytics...