We’ve been beating the Amazon tablet drum for a while—in fact, as early as April 2010, my colleague James McQuivey wrote that Amazon's product strategists should “go head to head” with Apple and create its own tablet. Now, on the cusp of Amazon actually doing so (perhaps as early as October), we’re turning up the volume with a new report explaining exactly how, and why, Amazon will disrupt the tablet market.
This report has been in the works for months. We held off publishing it last week out of respect for Steve Jobs, and we have great admiration for his inventions and influence on our culture.
Even though Amazon taking on Apple is a bit like David taking on Goliath (compare the market cap, profits, and cash position of the two companies), Amazon’s willingness to sell hardware at a loss combined with the strength of its brand, content, cloud infrastructure, and commerce assets makes it the only credible iPad competitor in the market. If Amazon launches a tablet at a sub-$300 price point — assuming it has enough supply to meet demand — we see Amazon selling 3-5 million tablets in Q4 alone.
Amazon’s quick ascension in the tablet market will completely disrupt the status quo. Apple will retain dominant market share, but Amazon will cause product strategists at:
First off, let me say this: I hope that Steve Jobs' health improves, and that he comes out of whatever challenges he's going through in the best of health. He's an amazing, visionary leader of a dynamic company -- and he's also a person with a family. Let's all wish him well.
While famously a CEO, Steve Jobs is also, it should be known, a product strategist par excellence. He's clearly been involved, in a deep way, in the development of Apple's product ideas, product designs, business models, go-to-market strategies, and responses to competition. These are the job responsibilities of product strategists. In his (and Apple's) case, product strategy has risen to the very top of the organization.
Product strategists of two different flavors are wondering how they might be affected by his resignation as CEO (and concomitant request to become chairman):
Product strategists who compete with Apple. Product strategists at companies like Microsoft, Google, Samsung, HP, Dell, HTC, and similar firms wonder if Steve Jobs' change in role might benefit them. They actually shouldn't wonder: His departure from the CEO spot won't benefit them -- not for a very long time, at least. Apple's product development road map stretches into multiple years ahead and has been shaped both by Jobs and by the organization he built. Jobs' departure won't affect Apple's product portfolio, quality, or competitiveness for a long time -- if ever.
We are publishing a new Forrester report today on the European tablet market. With the recent launch (and huge marketing push) of the Acer Iconia Tab and Samsung Galaxy Tab 10.1 in multiple European countries, one might think that things were looking up for Android tablets in Europe — but that’s not the case. In our report, we found that:
Europe is, and will be, a huge market for tablets. We are projecting that EMEA (Europe, Middle East, and Africa) will account for 14.5 million, or 30%, of worldwide consumer tablet sales in 2011. Three times as many Europeans as have tablets today say they are interested in buying one in the future.
Outside the UK, Apple could be vulnerable to competition. Apple has 52 Apple Stores in Europe, and 30 of them are in the UK. (For reference, there are 238 Apple Stores in the US.) Apple’s brand and channel presence is not uniformly strong in Europe; Mac ownership, for example, is lower in every EU-7 country than it is in the US.
But no competitor has met Apple’s challenge. Despite Apple’s potential vulnerability, we estimate that Apple still has 70% market share for tablet sell-through to consumers in Europe. (Sell-through is different from shipments; our interviews with European retailers confirmed that non-iPad tablet inventory is sitting in the channel — i.e., manufacturers are shipping more tablets than consumers are buying. So if you read reports that Apple has a lower market share, look at whether the report is measuring shipments or sell-through.) What’s more, non-iPad tablet competition is quite fragmented — OEMs, operators, and niche players form a crowded marketplace but one notably devoid of shoppers. iPad competitors’ prices are too high, and no competitor has matched Apple on content or channel strategy.
There's a lot of attention being paid to tablets cannibalizing PCs. As we've said in the past, we think PC cannibalization from tablets is overstated. But the cannibalization phenomenon is real: We wrote in a June report (The Products That Lose When Tablets Win) that we expect tablet cannibalization to accelerate in the next six to 12 months as slightly less affluent consumers buy tablets and have to make tough tradeoffs. Several predictions we made in the report are already coming true. We made the call that:
"Portable game player sales will go off a cliff. Portable game players (PGPs) like the Nintendo DS already have huge penetration, so there's a natural saturation point that PGPs are reaching anyway. That saturation combined with cannibalization from tablets and smartphones, which fulfill the same casual, on-the-go gaming scenarios but also multitask with email and other applications, spells trouble for PGPs. The Nintendo 3DS is already reporting weaker-than-expected sales, and we expect this trend to continue."
Much to Nintendo's chagrin, this prediction is proving accurate, as Nintendo reported that its 3DS sales plummeted to 710,000 units this past quarter from 3.6 million units the quarter before.
In the June report, we also wrote that game console sales would not be negatively affected by tablets and could actually see a boost from increased interest in gaming as mainstream consumers find joy in games like Words With Friends and Angry Birds.
We talk to product strategists in a wide variety of industries. Regardless of the vertical industry of their companies, they tell us that the release of new, disruptive products -- like Apple's iPad -- changes their relationships with their customers. Oftentimes, nearly overnight.
Whether their product comes in the form of “bits” (content, like media, software, or games) or “atoms” (physical products, like shoes, consumer packaged goods, or hardware), consumer product strategists must navigate a world filled with a dizzying array of new devices (like mobile phones, tablet computers, connected TVs, game consoles, eBook readers, and of course PCs). We call this proliferation of devices the Splinternet, a world in which consumers access the digital world across a diverse and growing number of hardware and platforms. And product strategists have to react by developing new apps, by crafting digital product experiences, and by rethinking their product marketing.
Delivering digital products across the Splinternet isn’t easy: It requires understanding -- and acting upon -- an ever-changing landscape of consumer preferences and behaviors. It also requires reapportioning scarce resources -- for example, from web development to iPad or Android development. Yet product strategists who fail to contend with newly disruptive devices (like the iPad or Xbox Kinect) will find themselves in danger of being left behind -- no matter what industry they’re in.
We'd like to invite product strategists to take our super-quick, two-minute survey to help us better understand how you are reacting to disruptions caused by the Splinternet:
My colleague Sucharita Mulpuru and I just published a substantial new Forrester report on tablet commerce, Why Tablet Commerce May Soon Trump Mobile Commerce. Basically, it’s huge already: In a recent study of 2,333 tablet owners fielded by Forrester and Bizrate Insights, we found that 47% of tablet owners report shopping and buying for something on their tablet, and an additional 13% say they’ve shopped on their tablet without buying. Even though smartphones far outnumber tablets, retailers surveyed by Forrester report that 21% of their mobile traffic comes from tablets. With tablets forecasted to reach one-third of US adults by 2015, tablet commerce only has one way to go: Up.
These findings suggest there’s a sea shift coming in tablet product strategy, which we see unfolding in three phases:
Phase 1 (2010-2011): Apple’s iPad catalyzes a media revolution. There’s no doubt that the iPad is used for more than just media — 20% of iPad owners report creating and editing documents on the device, for example, and the massive catalog of business, education, and other non-media apps attest to the iPad’s versatility. But our data shows that after email, media (playing games, watching videos, viewing photos, reading) are the most popular iPad activities. Apple has wrangled the best content from premium publishers, inspiring News Corp to launch an entirely new company just to produce an iPad app.
More than 90,000 iPad-only apps are available today. Forrester clients in a wide range of industries — media, software, retail, travel, consumer packaged goods, financial services, pharmaceuticals, utilities, and more — are scrambling to determine how to develop their own iPad app strategies (or browser-based iPad strategies).
Clients are asking us to help them address both challenges and opportunities associated with the iPad: How do I develop an app product strategy for the iPad? Does the browser matter, too? What will make my app or browser experience stand out from the competition? How will an iPad app complement my smartphone and Web properties?
If you are navigating these sorts of decisions, I'd like to invite you to a very exciting event being hosted by an analyst on my team, Sarah Rotman Epps. Sarah's holding a Workshop on July 27 (in San Francisco) to help clients like you separate the hype from the reality and take concrete steps toward developing a winning iPad app and browser strategy.
The Workshop: POST — Refining Your Strategy For iPads And Tablets
This Workshop focuses on refining your strategy for reaching and supporting your key constituencies through iPads and other tablets. We'll take you through the POST (people, objectives, strategy, and technology) process, helping you to:
Understand where the tablet market is going based on Forrester's latest data and insights.
Apply what other companies have done to your own tablet strategy.
Today HP launches the HP TouchPad, the first tablet based on HP's new operating system, webOS, which it acquired along with Palm exactly one year ago. HP's $1.2B initial investment in Palm, plus its additional investment over the past year to bring the TouchPad and its webOS smartphones to market, is a risky investment -- there's no guarantee that consumers will buy these products or that the consumer electronics market has room for another software platform. But the webOS investment is a risk HP had to take, in order to:
Compete with Apple. Apple owns its own hardware and its own operating system, which means it controls the experience to a greater degree than OEMs that make hardware for Apple or Google's software. With webOS, HP gets more control over the total product experience.
Differentiate itself from other OEMs making Android and Windows devices. HP wants to be more than a company that makes gray boxes running Windows. WebOS helps HP differentiate from the pack, but it's also an unknown to most consumers, and adoption is uncertain.
Hedge against PC cannibalization. In a recent Forrester report, we found that PC cannibalization from tablets has been modest so far but is likely to increase in the next six to 12 months. HP is the biggest PC manufacturer in the world, and it needs to adapt its product portfolio to avoid more disappointing quarters like this most recent one.
Sarah Rotman Epps is the senior analyst on my team who leads our research on tablets (and consumer computing) for product strategy professionals. She’s written extensively about the future of tablets but also about the characteristics of software and media experiences that succeed on tablets. (Forrester clients can read “Best Practices for Media Apps,” for instance). At the same time, I have written about how mass customization is finally the future of products in an age when customer-centricity reigns.
Tablets and configurators – the typical tool that consumers use to co-design customized products – are a match made in heaven. They share a number of characteristics that product strategists should consider when developing mass-customized product interfaces. For example, they both:
Computing is changing. The news last week showed that loud and clear, as Microsoft bet big on Skype’s voice and video technology and Google announced partnerships with Samsung and Acer to build laptops running its Chrome operating system. These developments point to a future where computing form factors, interfaces, and operating systems diversify beyond even what we have today. The “Post-PC Era” is underway, but its definition is not self-evident.
First, some history. “Post-PC” has been a buzzword in the past few months, since Steve Jobs announced at the iPad 2 launch event that Apple now gets a majority of its revenue from “post-PC devices,” including the iPod, iPhone, and iPad—a major milestone for a company that was originally named “Apple Computer.” The phrase was also part of the public discourse in 2004, when IBM sold its PC unit and former Sun Microsystems CEO Jonathan Schwartz told The New York Timesthat “We've been in the post-PC era for four years now,” noting that wireless mobile handset sales had already far surpassed PC sales around the world. In fact, the “post-PC” concept is more than a decade old: In 1999, MIT research scientist David Clark gave a talk called “The Post PC Internet,” describing a future point at which objects like wristwatches and eyeglasses would be Internet-connected computing devices.