The cyclical nature of consumer electronics is playing a role with the tablet swings we are seeing. But even with all the speculation or fear of the apocalypse with the tablet market, I still hold the opinion that it has lots of headroom and for the perceived underdog (Apple) it is highly strategic to their strategy in many countries.
Why do I say Apple is a perceived underdog? Well, its simple. Even though Apple sells more tablets than any other vendor by a healthy percentage, Android's tablet market share has been gaining. Much of this has to do with the low-cost Android tablet momentum in places like China and other emerging markets. In mature markets like the US, Uk, and Japan, the iPad and iOS are still dominating.
However, our research indicates an overwhelming number of consumers who purchased a low-cost tablet felt buyers remorse and intend to spend more money on their next purchase. There are only a handful of good premium tablets and Apple is the leader there putting them in a good position.
The Nexus 7 and the Galaxy Note 8 are also prime candidates. But only one of those I think has a key strategic role in what may be the biggest tablet market of all time–China.
Google's approved version of Android, which is tied to their Play store, has practically zero presence in China and will likely have a hard time ever catching on in that country. Even though sales of iPhones and iPad's to China are decent, the Chinese are not yet investing in the Apple ecosystem. The iPad is the product that I believe can change all that.
The easy answer is to say that the iPhone is Apple's greatest strategic product, but I believe it is actually the iPad. The iPhone has much more competition in every major market worldwide than the iPad does. This is because of the way its sold in most countries.
In many cases the iPhone is subsidized and sold through a carrier channel. The iPad is sold much different. Our research also suggests that consumer view the tablet as a PC, but they don't view their smartphones that way.So the buying preference is vastly different between the two.
The iPad's differentiated advantage
For Apple, the iPad represents their biggest differentiated advantage globally. Specifically in things like tablet optimized apps, the OS, hardware, etc. I expect the things Apple will do with future versions of the iPad will be an extension of this differentiated advantage they have.
So what are the things Apple can do with the iPad to maintain an advantage?
The easy answer is price. But this isn't always necessary. I expect Apple to still be aggressive with iPad pricing without having to be the cheapest product out there.
In fact I expect Apple’s pricing strategies to be similar to how pricing for the iPod worked for over a decade. In the beginning, the iPod's price dropped quickly but then stabilized for the rest of the product cycle. We are already seeing this price trend with the iPad Mini. It may drop still but then it will normalize.
(And by normalize, I mean Apple maintains the same price but adds features such as a faster processor, more storage, better camera, etc. with each new model).
Apple sets the pace with … security?
The other thing Apple can do is continue to move the goalposts technologically.
Apple's iPad is catering to both consumers and business users alike and security is going to be a hot button issue with our technology very soon. I expect Apple to take a leadership position in regard to security and make a big deal of it.
They are already looking to do this with iCloud keychain which will remember all your passwords across all your Apple devices. But I expect them to go even further with new biometric sensors.
Last year Apple bought a key biometric security company called AuthenTec and I expect this technology to appear soon in their iPads and iPhones. This will add another level of needed security for things like device authentication, password entering, and even will factor into how we use our devices to make online and physical purchases.
So is the iPad in trouble? There's no doubt the playing field is a lot different than 2010 when Apple had the market to itself.
Now there are a ton of competitors including a few with big enough R&D and marketing budgets to take Apple on head on. But the iPad remains the tablet to beat and I don't see that changing anytime soon.
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