After all, they say, a company’s chief concern is profitability and not market share.
That has been a common refrain at Apple. For decades, the company has not judged its performance on market share, but rather its ability to generate staggering profits. That’s why Steve Jobs never got caught up in OS X’s market share compared to Windows, and why, despite Microsoft’s attempts to compare sales figures, Apple was content to generate billions of dollars in profits and laugh all the way to the bank.
My colleague, and TabTimes editor David Needle, recalls Apple’s philosophy holding strong back in the 1990s. At that time, Jean-Louis Gassee, Apple’s then-VP of Marketing, scoffed at the idea of Apple needing more market share to be successful in the computer space.
“I bet BMW is never asked at auto shows why it has such a low market share,” Needle recalls Gassee saying during a press event back then.
That same outlook appears to hold up in Cupertino today.
Still, market share matters. When companies like IDC, Gartner, and others release market share data, they’re providing valuable insight into consumer preference. And perhaps most importantly, they’re telling us about the key factors that might determine the fate of certain companies in the industry.
That’s why I’m wondering if Apple’s time-tested strategy of caring more about profits (or as they would insist, quality products) than market share can hold up in tablets. Yes, the company is selling boatloads of iPads, but will the sheer number of Android slates hitting store shelves around the world eventually put Apple’s sales philosophy to the test?
Before you shrug it off and say Apple’s past success should be an indicator for the future, consider this: Apple’s worldwide market share fell during the second quarter from 60.3% last year to 32.4% this year. What’s worse for the company, its total shipments fell from 17 million in 2012 to 14.6 million last quarter.
Android is growing while iPad's share of the market slips
It’s worth noting, of course, that Apple launched a new iPad during the second quarter of 2012, which caused some disparity between the figures, but it doesn’t answer one major issue: Android market share grew from roughly 30% to 35% of the market in 2012 to over 60% this year. In other words, more people than ever are buying Android slates.
It’s perhaps also informative to look at China – widely believed to be the most important market in the world. According to data from IDC, Apple’s market share during the second quarter fell to 28%. During the same period in 2012, Apple’s Chinese tablet market share was at 49%.
“Apple has lost its luster in China in the past six months and is no longer the must-have product in any category,” China Market Research Group managing director Shaun Rein told Bloomberg in an interview published on Aug. 21. “Consumers (in China) are more price-sensitive. Before, people would skip lunch to buy an iPad.”
That comment is an important one to dissect. The analyst is not necessarily saying that Apple’s market share is declining because its quality is slipping, he’s saying that the company is having trouble because consumer attitudes are changing. Sure, they can get their hands on a high-end, top-of-the-line iPad, but at least in China, it’s even more desirable now to buy a cheaper slate that can do everything an iPad can, albeit not as well.
Value in cheaper Android slates
Judging by the iPad’s worldwide sales, the same appears to be true in other markets. More people are buying iPads, but a much greater number are now finding value in cheaper Android slates.
Which, of course, brings us to the ultimate question: can Apple continue to deliver enough quality in its products to get more and more customers to buy its iPad? Further, can Apple afford to continue to deliver distinctly better quality, and thus, charge more, realizing that consumers around the globe, and especially in the most important market, China, are driven by prices?
Although Apple would like to make us believe that the tablet market is PCs all over again, the smart money is on not believing that. Yes, things look similar now, but a massive, burgeoning consumer economy is developing in China, and that, alone, has the potential to be extremely impactful.
Add that to a general desire on the part of consumers all over the world to save cash, concerns over long-term economic factors, and the very fact that Android is a better option for some tablet customers, and we might be on the cusp of a dramatic shift in how Apple is viewed and its products purchased.
The iPad might reign supreme right now. But if things keep up, it might not stay that way for long.