For the second quarter in a row, iPad sales dropped year over year. Turning things around is going to take a change in strategy.
The company sold 13.3 million units from April to June, down 9% from the 14.6 million sold in the same period last year. And the sale of 16.4 million iPads in 2014’s first three months were down from 19.5 million year over year. Clearly, the company has a problem.
Apple has competition on two fronts. Large numbers of consumers are buying budget Android tablets instead of the iPad mini, while growing interest in Windows tablets is starting to put pressure on sales of the iPad Air.
To face these challenges, Apple needs to expand its product line. The company has tried for too long to appeal to a wide range of buyers with just a handful of products. It has become critical to launch a more affordable iPad, as well as a high-end one for business users.
An Entry-Level Model
After a shaky start several years ago, tablets running Google’s OS now outsell the iPad. A large majority of these Android devices are very inexpensive – under $150. In places like the U.S. and Europe, these are being bought as second and even third computers, to be used for simple tasks like web surfing in front of the TV. In the developing world though, these low-cost devices are being purchased as people’s primary computers.
Apple doesn’t have a tablet that can compete in this area. Its most affordable offering is the original iPad mini, which sells for $300 – more than twice the price of many of its competitors. While many would argue that the iPad mini is a better product than its super-cheap rivals, others can see the benefits of saving $150 to get a tablet that’s “good enough.”
Apple went the wrong direction with its second-generation mid-size tablet, the iPad mini with Retina display. This model debuted at $400, which was 25% more expensive than its predecessor. Apple needs to look for ways to offer more affordable tablets, not higher priced ones.
Apple is expected to release a third-generation of the iPad mini this fall. When it does, the company should discontinue last year’s model, and look for ways to lower the cost of the new one. And the original iPad mini should be kept around at an even lower price – a 10% reduction would be a good start.
Long term, CEO Tim Cook should challenge Apple’s engineers to find a way to create an iPad that can sell for $200. This goes against the company’s strategy of targeting only premium tablet shoppers, but declining sales show that this approach isn’t viable over long periods of time.
A Business-Class iPad
Windows tablets certainly haven’t enjoyed the success of iOS or Android ones, but that’s starting to change. Many of the individuals and companies looking for replacements for aging Windows 7 PCs and laptops are considering tablets like the Microsoft Surface Pro 3.
Microsoft has already done half the work — Office for iPad is the productivity tool executives and corporations have been waiting for.
But now it’s time for Apple to do the rest. If it hopes to remain competitive against Windows tablets, 2-in-1s, and hybrids over the long term, there needs to be an iPad with a 12-inch screen that comes with a keyboard. This device will resemble the MacBook Air, but with a removable keyboard and iOS.
Add-on keyboards are already popular accessories for the iPad Air, and there are a wide range to choose from. But Apple needs to offer an iPad Pro that comes bundled with one as part of its business focus.
Deeds Not Words
During the conference call with investors after the Q2 results were announced, Cook showed strong support for the iPad.
“We still feel that category as a whole is in its early days and that there is also significant innovation that can be brought to the iPad, and we plan on doing that,” he said.
Apple needs to get serious about that innovation. The drop in sales over the past six months shows that the company can no longer count on sales growth just by periodically releasing moderately improved versions of its current tablets — it needs to break into additional product categories. Offering a truly budget iPad and a business-class model is the best way to accomplish this.