Pricing and weak ecosystems behind slow tablet sales

IDG News Service - While Apple's iPad continues to be a big success, the tablet market offers a harsher climate to other vendors -- and pricing strategies may be a key cause of their difficulties.

Last week Motorola said it sold only 100,000 Xooms during the third quarter, while Apple sold over 11 million iPads in the same period. Meanwhile, Research In Motion sold just 200,000 of its critically slammed PlayBook tablet between June and August.

So far, Samsung has been the most successful challenger, selling about 1.6 million Galaxy tablets during the third quarter, according to data from market research company Canalys.

Predicted to outsell all other challengers -- and possibly prove the point that price is critical to compete with Apple -- is Amazon, which has seen such pre-order demand for its upcoming Kindle Fire that it decided to ramp up production. The company is "increasing capacity and building millions more than we'd already planned," CEO Jeff Bezos said last week.

What sets the Kindle Fire apart from competing products is its US$199 price tag, combined with access to movies, TV shows, songs, magazines and books. Today, products like the Xoom and Samsung's Galaxy Tab 10.1 originally cost more than twice as much as the Kindle Fire, and about the same as the iPad.

"Tablets at high prices, meaning close to that of the iPad, are simply not going to sell meaningful volumes for the foreseeable future," said Richard Windsor, global technology marketing analyst at Nomura International.

Neil Mawston, director at market research company Strategy Analytics, agrees: "Pricing is critical for tablets. Apple can charge a premium, but very few others can," he said.

Amazon slashing its price to the bare minimum has driven growth, whereas Motorola, HTC and others have tried to maximize pricing and that has backfired, according to Mawston.

Also, Hewlett Packard's fire sale of the TouchPad, slashing prices from $499 to $99, following its decision to withdraw webOS hardware, demonstrated that pricing is a critical factor in determining success, according to Canalys. The company ended up shipping 560,000 units, Canalys said.

But pricing isn't the only factor. The weak user interface on Android Honeycomb, the OS that is used on current Android tablets, hasn't helped, according to Roberta Cozza, principal analyst at Gartner.

Amazon has added its own user interface to Android.

Also, the tablet is mostly about media consumption, so you need content and applications to attract users, Cozza said.

"The user experience on Android simply isn't as good as it is on the iPad, and you don't have all of the applications and access to the content Apple is offering," said Windsor.