Friday, May 07, 2010

iPad Pricing in Canada & Sales Cannibalization Report

iPadincanada reported an Apple press release announcing iPad pricing in Canada, although data plan costs from Canadian wireless providers is up in the air::

WiFi Models::
$549 (CAN) for 16GB
$649 (CAN) for 32GB
$749 (CAN) for 64GB

WiFi + 3G Models::
$679 (CAN) for 16GB
$779 (CAN) for 32GB
$879 (CAN) for 64GB 

These prices are about $50 more than US prices, which isn't worth a border run in my book and I'd rather keep taxes in Canada.

In my mind, it's becoming clearer what the iPad "means" to consumers. While my take has been that the iPad needs to have content and apps to really drive its value proposition to stratospheric levels, something which may be lacking in Canada for books and magazines due to lack of development by publishers, the "cool" technology factor and the laptop replacement angle may be what will fuel sales. I'm also wondering how the forthcoming Android tablets are received.

I don't think there's many degrees of freedom here for pricing. The teardowns of the iPad and analysis are showing the profit margins are relatively slim, particularly given Apple's product launch and distribution strategy, so pricing much lower is unlikely. Pricing too high runs into issues of perceptions of value, given price and features, as well as the perception of being too close to a Macbook laptop with limited functionality.

This Appleinsider article reports a March Alphawise study in the US examining cannibalization of sales by the iPad. This graphic shows which product categories would be foregone if the iPad were purchased::

The iPad represents a positioning void in the market, where no products were being offered between a mobile Internet appliance, laptops, and cheaper netbooks. The iPad is a compromise and along the lines of a larger iTouch. The above graphic shows that 44% of users would forego a laptop purchase due to an iPad purchase and 44% would forego an iTouch purchase.

Apple is betting its future on mobile and the iPad may make a lot of sense for users seeking mobile web access with a larger screen, but not as much functionality as a laptop. The price point may be a bit high in this economy for the mass market, but if there's a lot of perceived value from the availability of content and apps that consumers want, I feel the iPad could take off in sales. That's a question that remains to be seen, given Apple's restrictive policies in its app store and competition from Android in the future.

Song:: New Order-'Doubts Even Here'

Twitterversion:: #iPad hardware pricing announced for Canada & numbers on cannibalization of iPad on other technologies, including #Apple's. @Prof_K

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