So there’s a story this week that raises yet another theoretical question, which is whether Apple plans to somehow enter the tablet price wars and sell iPads real cheap. It doesn’t matter where the story originated, since it doesn’t deserve a link. But there’s a long study of tumbling prices of tablets, wondering how Apple can stay the course without suffering big time in sales and market share.
Of course, this brings to mind the chronic complaints that Macs cost too much, and that Apple was wrong not to enter the cheap PC market even as Windows boxes became cheaper and cheaper. Did I say cheaper?
Apple’s argument is that the company doesn’t make junk. But that doesn’t mean Apple doesn’t make inexpensive gadgets. You can, after all, buy an iPod for as little as $49, and a Mac mini is $599. Well, as computers go, $599 is actually regarded as somewhere in the middle of the price range, if you can believe how far things have come. It’s also not regarded as a huge seller. The far more expensive iMac has that honor, but the best selling Mac is a note-book, the MacBook Air, which starts at $999. That, too, is regarded is quite high for portables except when compared to so-called UltraBook competitors, which may actually cost the same or somewhat more. When you add touchscreen capability, it can be a lot higher.
When it comes to tablets, sure you can buy one for $50, and it might even work, more or less, for a time. But there are valid reasons why millions pay more for an iPad, which begins at $299 for the original iPad mini. In passing, the media originally overestimated the price of the first iPad, which was assumed to be closer than $1,000 rather than the actual $499 starting price. Other companies were flummoxed and were unable to sell gear that was the same price or higher. So they made them cheaper.
That lead to solutions from Google, under the Nexus brand and Amazon, under the Kindle brand, which sell for roughly the cost of making them. So there’s little or no profit, and when costs get lower, it appears prices are lowered rather than take some more profit from the gadget.
Now Amazon and Google have similar marketing schemes. Sell the hardware with little or not profit, and make it up with the sale of other products and services. It’s the old printer and consumable scheme. Here Amazon will fare better, because the online catalog is so expansive. So the Kindle becomes a worthy loss leader. With a Nexus smartphone or tablet, it’s not as certain, as Google Play is nowhere near as prosperous as the App Store.
Yes, I suppose large numbers of buyers are happy to pay less for something, and it’s true that the best Android gear is probably a match for Apple’s in many respects. But most of it is just inexpensive junk. You can’t, for example, expect much value in the $69 Nextbook 7-inch tablet that I found over at Walmart’s site. And that’s not quite the cheapest. There’s a 7-inch RCA tablet for $59.99, but that’s not the RCA of old. The hardware portion of the tradename is owned by ON Corporation, a Korean electronics maker who specializes in cheap gear. Sure, RCA was once the brand name for decent quality gear, but that was long ago and far away, but ON is no doubt hoping people will be deluded into believing the brand still counts for something.
So should Apple abandon all hope of earning high revenues and profits to chase after volume and low prices? Does the question even make sense except to fulfill the foolish fantasies of tech and financial pundits who have lost a grasp of reality?
Yes, I suppose it’s true that Apple might have to change the business plan some day, particularly if sales and profits aren’t keeping pace. But that doesn’t mean a wholesale rush to the bottom is required. It may well be that Apple will just have to modify price and profit structures a little to remain competitive. You may have already seen some of that on the Mac platform with lower prices for the MacBook Pro with Retina display updates, and some of the latest MacBook Air configurations. Certainly offering OS X Mavericks free, and making iWork free for people who buy new Macs, or who already have a recent version, is yet another example of making Macs a better value.
But you can’t exactly call them cheap. Apple still charges fair prices for what you get, just as they do with the iPhone and iPad. Telling Apple how to do business just doesn’t make a lick of sense so long as the company is doing well. The problem has always been that Apple is being evaluated in the same fashion as companies that do things differently, assuming those differences are better regardless of the facts.
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