The new iPad seems set to secure Apple's [AAPL] hold on the tablet edge of the PC market for yet another year, but surely the Oompa-Loompa's inside the Cupertino dream factory can't hold this lead forever? Perhaps not, but here's just a few of the challenges other tablet makers need to meet to compete.
And I'm not just talking mind-share, I'm talking brand loyalty, customer satisfaction, after-sales satisfaction and more. These factors help make the Apple product desirable. The company's move to offer the new iPad as "the new iPad" underlines just how much hold it now has on the tablet market. The iPad is the tablet market, and the new iPad is an even better version.
Some stats to confirm these claims:
- Apple is the world's most-admired company, says Fortune.
- 74% of existing iPad owners say they're "very satisfied". Just 49 percent of users of other tablets and 54 percent of Kindle Fire users feel the same.
- 48 percent of existing iPad owners plan to buy the new iPad.
- The upgrade cycle is rabid -- 16,000 older model iPads were listed on eBay in the last two weeks.
- Apple's online store almost collapsed on weight of pre-orders in the hours following this week's launch event.
Apple has 361 retail stores worldwide bringing in an average per store revenue of $17.1 million. Situated in busy locations, these places attract millions of Apple fans and free Wi-Fi seekers alike.
In addition to its own points of presence, the company also has a huge network of third-party retail outlets (including some of the biggest chains), often offering Apple-defined shopping experiences.
Apple CEO, Tim Cook, told investors Apple has over 130,000 points of sale "throughout the world" during the company's most recent financial call.
Apple's online store is one of the busiest online shopping portals on the planet. The company has the capacity to bring new products to the world market fast following its finely-orchestrated launch events.
Distribution goes beyond product sales. You should also consider its media content and app distribution system, iTunes. Already offering near 600,000 apps, the App Store is the biggest in the world. iTunes' broad offering of music, movies and TV shows is also second to none, delivering an approachable media acquisition environment that's both easy-to-use and maintains high degrees of consumer trust and brand loyalty. (The latter tempered by accusations of locking buyers into the formats it uses).
- Apple retail and iTunes coverage included within company's most recent financial report.
- App Store sales hit 25 billion.
- iTunes accounted for 28% of all US music sales in 2010 (I know there's more recent figures).
Manufacturing and price
It's not enough to toss a few components together to create a tablet wannabe in hope customers will flock to purchase the new toy. Component prices are steep and these devices are at the leading edge of miniaturization and new technology.
Manufacturers must make hard decisions, not just in terms of processor speed and graphics power, but for everything else: you need the best interconnects, excellent battery life, even the interconnects between components must be fully examined and thought through.
Each detail of product design must be informed by the end user experience. There's no point using a second-class component at any stage of the assembly; there's also no point including features customers won't use: not only do these impact on manufacturing costs and battery life, but the inclusion of stuff people don't want serves to reduce the user experience.
Apple has defined the tablet market as something that's finely-finessed, in which every detail is fully thought through.
Because Apple's approach is to offer a limited number of devices and to share components where possible, and because it holds such a large chunk of the tablet, smartphone and intelligent media player markets, it is able to apply economies of scale all across the manufacturing and component acquisition process. This means it inevitably gets its components at better prices than most other firms can expect.
Even Samsung needs to acquire some of its key components externally, and even then it needs to ensure it doesn't cannibalize margins in its internally associated but independently reported business units.
This inevitably translates into price. RIM, HP and others last year lost lots of money through shifting unsold tablet inventory stock at low prices. They lost money on every sale. That's not business. That's starvation.
Apple's move to reduce the cost of the iPad 2 in conjunction with the iPad 3 launch has given competitors even more of a headache when it comes to cost of manufacture, distribution, profit margins and customer price.
I'm not throwing any stats into this. I think the majority of these claims should be reasonably obvious to anyone with a brain. If you want some stats to back these assertions up, just ask for them in comments below and I'll find you a few.
The software, stupid
Apple is a software company. Apple is a software company. Apple is a software company.
Yes, it creates products emblazoned with its logo, but at heart these devices are designed to be the best possible hardware to run its software.
Apple develops insanely simple software expressions of complex tasks.
Anyone who has ever looked under the bonnet of software executions now seen as being as commonplace such as push email, content sync, or image manipulation knows that each of these operations demand software complexity. The company hides this complexity and offers services in such a way that, in most cases beyond initial set-up users don't have to get involved in the technical nitty-gritty.
While that's an advantage to competitors eager to attract those incredibly critical and hard-to-please technically-minded customers, for the mass market which defines the Post-PC age, Apple's simplicity matches the zeitgeist.
[ABOVE: Apple's new Apple TV UI. It's also about the ecosystem.]
Software, software, software
Each iteration of iOS introduces new software paradigms. For example, iOS 6 is likely to deliver new mapping services, better iCloud sync, a release candidate Siri for more countries and more devices, enterprise-class security, NFC and mobile wallet support and intelligent bandwidth usage handling features. I'm anticipating new technologies designed to transfer huge files at lower bandwidth in order to help carriers accommodate the ever-increasing data demands of mobile users.
Beyond the system software, there's the apps. Just look at iPhoto and its new approach to user-focused image editing simplicity to get an idea of this. Or look at the games and other solutions demonstrated during Apple's Wednesday keynote. Graphically rich and designed to fully exploit the new iPad's Retina Display, they prove the company is fully committed to ensuring its developers have the tools they need to continue to innovate on the platform.
End users spend a lot of cash on iOS apps, developers like their money, and Apple's constant innovation when it comes to offering them new API's mean its platforms are, you know, interesting to develop for.
All these devices are connected. Apple's iCloud brings them all together, from Mac to iPhone to iPad. Even to the PC. AirPlay video mirroring and the Apple TV (and anticipated Apple television) make these products central to people's media-centric lifestyle. Meanwhile elements such as Document Sync boost understanding and adoption of cloud computing on a mass market device. You can use these things for work and for play.
Apple's competitors can't beat an iPad on price, distribution or ecosystem. There's no one else who offers this rubber-clad combination of market advantages at this time.
While Android has made some short-term gains in the ultra-competitive smartphone market, these gains will be lost unless Google succeeds in its attempt to emulate Apple's perfect storm of implementations in order to deliver a surrounding ecosystem (Google Play, home networking and so on) to make its partner's devices essential and relevant to mass market consumer need.
Those noisy Android fans may want to bear in mind that Apple has been assembling the foundations for its tablet market success since 2000 when it began work on the iPod. Can Google really create a strong and viable alternative in under 12 years?
Apple will dominate the tablet market in 2012. Windows 8 may form a threat to continued dominance, but Apple is preparing for this by holding some features (Siri for example) back from the current release in order to introduce them at a later date in response to any perceived Redmond/Nokia threat.
In addition to which, its use of the name "the new iPad" effectively frees it from being tied to annual product releases. After all, what is there to stop the firm issuing new hardware in six months time, under the same name?
This means competitors studying the space should tick yet another box beside their list of Apple's current market advantages -- the company has become unpredictable. Would you want to mess with an 800-pound gorilla whose moves you couldn't predict? No, nor would I. Apple owns the tablet market. And doesn't seem inclined to let it go.
Please don't accuse me of being rabidly pro-Apple in this account. This is an objective summary of the market at this time, a market Apple is winning. To succeed, competitors need to match each of these advantages. That's their challenge. Can they do it? They haven't yet, so realistic answers, please, in comments below:
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