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.
While all eyes in the online retail space seem to be on social networks and smartphones these days, we’re seeing an emerging trend with tablets that could be the most interesting of all. Only 9% of web shoppers now have tablet devices, but here’s the big deal — most of those people already own smartphones (as well as PCs, of course), and they are saying that they actually prefer to use their tablets for shopping. Not only that, but the ownership of the tablet device itself actually increases the amount of time that people spend online. And we’re anticipating a hockey stick in tablet adoption in the next five years on top of all that. You can read more about these findings in the report my colleague Sarah Rotman Epps and I just wrote titled, “Why Tablet Commerce May Trump Mobile Commerce,” which is based on findings from our joint research on online shoppers with Bizrate Insights. Some of the most compelling aspects that are helping to drive the shopping experience on the device:
The larger screen. Not surprising, given the choice between a smartphone and a tablet, consumers find it a lot easier to use the latter to surf the net, click on links, and type in the critical biodata to purchase something online, especially since PayPal Express doesn’t seem to be integrated onto most mobile commerce sites yet.
The portability. Consumers love taking their tablets around the house and on the go. The living room is the most common room where the tablet is used, but out of the home is also popular, particularly at restaurants and in airports.
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.
Forrester recently published the “State Of Retailing Online 2011: Marketing, Social, and Mobile” report in conjunction with our friends at Shop.org. It is available on Shop.org (with a subscription) now.
Some highlights include:
Understanding which marketing tactics are still leading to growth.
Examining the investment in social and the returns retailers are seeing.
Analyzing mobile and tablet adoption and strategy.
Tablets are a red hot topic since the launch of Apple’s iPad more than a year ago. Tablets are the most visible aspect of a broader topic on the minds of vendor strategists – the consumerization of IT. Consumerization is defined variously as using personal devices for work, pay-per-use payment models, spending personal money for work-related cloud services, and employee self-provisioning of IT capacity outside the oversight of IT. In our annual Forrsights Hardware Survey, Q3 2010, we asked IT infrastructure buyers responsible for supporting end user computing about a variety of topics related to consumerization of IT and learned that:
The IT organizations in 26% of enterprises (firms with 1000 employees or more) were planning to implement or had implemented general purpose touchscreen tablets such as the Apple iPad. Of that total, 4% reported they’d already implemented, and 17% were already piloting by Q3, 2010, approximately 6 months after the launch of this brand new category. SMBs, firms with 999 employees or less, were lower at 18% planning or implemented.
Only 2% of firms, large and small, reported implementing or piloting bring-your-own-PC models, despite several years of hype among the desktop virtualization software vendors about this model. We expect this PC deployment model to grow, but it’s not a broad trend yet.
Firms are using more consumer-style Web applications on PCs, with 84% firms increasing their use of Web applications. But they’re not abandoning locally installed applications. 55% of firms are increasing or staying the same on their use of installed applications, while only 4% are seriously reducing use.
Forrester published a new report today making the call that the iPad challengers that have been announced so far—Android Honeycomb tablets from Motorola, Toshiba, and others, as well as the BlackBerry PlayBook and HP TouchPad—are solid products with fatally flawed product strategies.
In short, competing tablets are too expensive, and can’t match the Apple Store as a channel. These two claims are related: Forrester’s research has shown that consumers attribute more value to Apple products because of the in-store service. Consumers are not only comparing feeds and speeds; there’s also a human factor. The humans working in the Apple Store will have a huge impact teaching consumers about the iPad and how to use it. Compare the experience of walking into an Apple Store, where the iPad is front and center, to walking into a Verizon store where the Samsung Galaxy Tab is collecting dust at the back of the store and the sales reps don’t quite know what to make of it. Or walking into a Best Buy store, whose shelves will soon be lined with similar-looking tablets with similar functionality.
Apple understands desire. The first thing consumers will notice about the iPad 2 is how it feels: Lighter (by a crucial 2 ounces) and thinner (at 8.8mm, thinner than an iPhone 4). Color triggers emotion: iPad 2 comes in not just black but white, with multiple colors in the thin "smart covers" that snap into place with "auto-aligning magnets" and clean those unsightly fingerprints off your screen. The rest is important but more cerebral. Dual-core processor, HDMI video-out converter for the 30-pin connector, etc. Emotion enters back into the equation when consumers see what they can do with the device--see their loved ones through FaceTime, touch-edit videos in iMovie, improvise on touch-instruments in GarageBand and actually sound good doing it.
In a post-PC world, consumers have a more intimate relationship with their devices. They use them on the couch and in bed and not just at their desk. They show their devices to other people (40% of iPad owners in Forrester's surveys report regularly sharing their iPad with other people). Fostering that desire is a smart way to differentiate your piece of glass from other pieces of glass that perform essentially the same functions.
Beyond the device itself, Apple's product strategy cultivates an emotional connection with consumers through:
Content. Apple's unrivaled app ecosystem adds value to its product. With 65,000 apps, the iPad has the edge in custom-built content. For consumers shopping for tablets, the number of apps isn’t as important as the price of the device, battery life, and 3G service flexibility, but it does matter: 23% of consumers considering buying a tablet rank “number of available apps” in their top-three important features, according to a Forrester survey fielded in January 2011.
My colleague John McCarthy just published an excellent report sizing the "App Internet," a phenomenon Forrester defines as "specialized local apps running in conjunction with cloud-based services" across smartphones, tablets, and other devices. Tablet devices alone will generate $8.1 billion in global app sales in 2015, up from $300 million in 2010. This is a huge number, but as the report explains, it's only a fraction of the total spend on apps when you factor in the cost to develop the apps and reinvent the processes behind the apps. This is no surprise to companies like News Corp., which will have spent $30 million through June 30 on "The Daily" iPad app. That $30 million included major process reinvention such as building an entirely new content management system to handle the all-digital production of The Daily's newsroom.
I recommend that product strategists developing experiences for tablets read John's report. Some key takeaways:
Apps are a source of dynamism and innovation for tablets. What we've seen with tablets is that even on the iPad, consumers report spending more time using browsers than using apps, but apps are an important part of the experience. iPad owners in Forrester's January 2011 consumer survey report downloading, on average, 20 apps for their iPads since getting the device, and spending an average of $34 on tablet apps.