On Monday, February 2, 2015, Tiernan Ray of Barrons reported on a research note published by Canalys. Ray’s article is titled Tablets Fall 12% in Q4, First-Ever Decline, Says Canalys; 7-Inch Models Cannibalized. Ray mentions this note claims “that shipments of tablet computers fell in Q4 by 12%”.
Anyone with an interest in consumer preferences for small, smart devices for computing on the go will likely look at the Canalys claim, especially if other published research affirms the numbers, as an indication of how Apple’s product marketing has successfully convinced buyers in mature markets, and even China, to value the iPhone as a status symbol. When this product magnetism is combined with carrier incentives, consumers apparently passed up opportunities to buy tablets to obtain an iPhone 6 or 6S.
Apple does not appear to be suffering much pain from these changing consumer tastes. According to Apple’s most recent quarterly earnings report, the surge in iPhone buying more than offset the 18% drop in tablet sales Canalys notes. But will the same scenario play out next year, when Apple debut a new iPhone? Would it not make sense for analysts to discount future earnings estimates based on an understanding of just how consumers of luxury electronics might behave, over time?
Unfortunately there is not any mention of this type of skepticism in Ray’s article. When buyer sentiment can turn quickly negative when products “[fail] to wow” it is reasonable to call a market top, of sorts, for this category of products. Regardless of the size of Apple’s operations, and its deep pockets, it is not likely we will continue to see widely popular new product releases time after time after time when the only real incentive for buyers is to announce to their peers they can still afford to buy the newest pricey gadget.
The Canalys report also mentions a serious drop in sales for Samsung tablets. In my opinion there are legitimate reasons for this, not the least of which is a combination of Google’s decision to no longer support “early” versions of Android, and Samsung’s own poorly timed introduction of new tablets, too often to the detriment of customers unfortunate enough to buy a product about to be obsoleted. But I argue the luxury market condition also weigh heavily on Samsung’s results. By crafting product promotion around a “competition to be the best” assumption, Samsung rendered its own small form hardware devices fair game for buyers to cannibalize in their frenzy to consume an iPhone 6 or 6S.
Ira Michael Blonder
© IMB Enterprises, Inc. & Ira Michael Blonder, 2015 All Rights Reserved