“Apple’s Lower Prices Are All Part of the Plan,” ran the headline for an interesting piece . . . by Nick Wingfield of the New York Times.
Wingfield believes that Apple, “once known as the tech industry’s high-price leader,” is carrying out a major strategy change to the point where it is now competing with, and often beating, its rivals on hardware prices.
I’ll have to admit that despite some interesting anecdotal pricing comparisons made by Wingfield, I’m not feeling him. Yes, Apple has certainly shown some signs that it is pulling back some on its hardware prices, and those prices could soon collapse by 30% or more due to forces entirely outside Apple’s control. We’ll get to that, but it is unlikely that such a collapse would reflect Apple’s strategy.
. . . .
For starters, let’s look at the tablet market, which it is entirely fair to say was created through the innovative brilliance of Apple and its late leader Steve Jobs. The brilliant success of the iPad — both in its elegance and in its acquisition rate by the public — made fierce competition inevitable. So while iPad sales continue to grow dramatically quarter over quarter, iPad’s overall tablet market share fell from 95.5% a year ago to 66.6% in the third quarter of 2011, FierceWireless reported Friday. Nothing truly stunning there; it’s a pattern one could expect to see in any new market as it begins to mature.
A little more of a jaw-dropper is that the market share for the various Android tablets on the market — including devices from HTC, LG, Motorola, Samsung, Acer and Dell — grew from 2.3% to 26.9% in the same period.
Now, in the fourth quarter of 2011, the Android market share is likely to grow even more dramatically with the launch of the Kindle Fire tablet, priced at $199 and capable, Amazon clearly believes, of doing everything an iPad can do except for the things that only a few people really care about.
If the Kindle Fire hits the hardware sweet spot once people have it in their hands, it could quickly become the single most coveted holiday gift for smart grownups this year at that $199 price, and that price and popularity would constitute a very powerful if traditional pressure on the $499-to-$829 iPad price structure.
. . . .
But there could be another mission for Amazon, one that could well influence the economics, the retail pricing, and perhaps even the share price for a competitor such as Apple over the next few years. It’s easy at this point to think that Amazon’s new two-way hardware market will be dwarfed in scale by Apple’s front-door production and retail power.
But Amazon knows better than anybody the effects that its Amazon Marketplace secondary market for new and used books had on competing booksellers and publishers over the past decade. Some in the publishing industry believe that Amazon’s customer-friendly innovations actually destroyed billions of dollars in corporate wealth, even if it also fueled tens of thousands of small and often home-based businesses.
“Some companies,” Amazon CEO Jeff Bezos is fond of saying, “do everything they can to raise prices for their customers. Other companies do everything they can to lower prices for their customers.”