Amazon’s Kindle Tablets May Be Better Than iPads
The latest report from market research firm IDC showed that Apple is still the world’s top tablet vendor, even though its percentage of market share and overall unit shipment numbers have continued to slip compared to last year. According to IDC data, Apple has a 22.8% share of the worldwide tablet market after shipping 12.3 million units in the third quarter of 2014. Since Apple’s tablet market share has continued to decline over the past several quarters, it will probably not be long before the iPad loses its top-selling position, as even more low-cost alternatives flood the market. That market shift likely won’t concern Apple too much since it has traditionally focused on producing products that emphasize quality over quantity. In other words, Apple is more interested in making a few high-quality tablets that people are willing to pay a premium for, rather than many low-quality tablets sold at a discount.
However, that inclination toward delivering a superior user experience may also be why Apple may find J.D. Power and Associates’ latest study of consumer satisfaction in the tablet market more concerning that the iPad’s shrinking tablet market share. According to the J.D. Power 2014 U.S. Tablet Satisfaction Study Volume 2, Apple’s iPad has lost its No. 1 spot to Amazon and its line of Fire tablets. This is the first time that Amazon has topped J.D. Power and Associates’ semiannual tablet satisfaction study and is one of the few times that Apple has failed to maintain the highest ranking. The latest study was based on a survey of 2,686 tablet owners conducted between March and August 2014, so it doesn’t include any customers’ experiences with Apple’s latest Touch ID-enabled tablets, the iPad Air 2 and the iPad mini 3.
Apple’s iPad topped the previous tablet satisfaction study that was released in May 2014, after briefly surrendering the top spot to Samsung in the late 2013 edition of the study. As seen in the graph above, Amazon received a satisfaction score of 827, Apple received a score of 824, and third-ranked Samsung received a score of 821. According to J.D. Power and Associates’ website, the marketing information company measured consumer satisfaction across five factors, which are listed in order of decreasing importance: performance (28%); ease of operation (22%); features (22%); styling and design (17%); and cost (11%). Customer satisfaction with a tablet was then expressed with a number on a 1,000-point scale.
Apple has previously highlighted the iPad’s high consumer satisfaction scores as a way of deflecting concerns about its shrinking market share. “Customers continue to love their iPads,” said Apple SVP and CFO Luca Maestri according to a transcript of the company’s fiscal 2014 fourth-quarter earnings call provided by Seeking Alpha. “In an August survey by ChangeWave iPad Mini with retina display earned an incredible 100% satisfaction rate, and among consumers planning to purchase a tablet within 90 days, the survey indicated a 55% plan to buy an iPad.” Maestri’s comments were made after he revealed that Apple sold 1.8 million fewer iPads in this year’s September quarter than it did in the year-ago quarter.
It should be noted that cost is the factor with the least weight in J.D. Power and Associates’ scoring system, a metric in which Apple would presumably perform poorly, since the iPad is typically more expensive than many similarly equipped tablets made by other companies. Not surprisingly, consumer satisfaction with cost reached a record high of 783 points in J.D. Power and Associates’ latest study, thanks to several new low-cost tablet manufacturers that have entered the market. J.D. Power researchers noted that nearly one-third of tablet owners “selected their device primarily due to its lower price.” For this reason, even though cost was only an 11% portion of a tablet’s overall satisfaction score, it appears that the increased number of cheaper tablets now available on the market may have colored some consumers’ perception of Apple’s iPad models.
Fortunately for Apple, the increased customer appreciation for low-cost tablets may wear off once consumers realize that many of these devices deliver a subpar user experience. “As value-priced tablet brands continue to flood the market, customer attention is turning away from just the price of the device to their perception of the combined value of price, features and performance,” observed J.D. Power telecommunications services senior director Kirk Parsons. “Tablet brands that continue to successfully convey more value and package more performance at a reasonable price are more likely to satisfy tablet owners and increase loyalty and advocacy for the brand.”
Besides ultimately disappointing many users with inferior features or performance, there are also indications that low-cost tablets won’t be around for the long run as manufacturers start to realize that devices sold at razor-thin profit margins can’t be maintained over the long run. As noted by IDC senior research analyst Jitesh Ubrani, “A sub-$100 tablet simply isn’t sustainable.”
On the other hand, although none of Amazon’s new tablets cost less than $100 (excluding the Kindle e-reader), the e-commerce giant may be one company that is uniquely qualified to produce a low-cost tablet that still delivers a satisfactory user experience. Amazon has a long history of offering its hardware at cost or even below cost, in the expectation that it will recoup any losses through its services. While it remains to be seen how long Amazon can keep its No. 1 spot in J.D. Power and Associates’ tablet satisfaction study, its ascendancy is indicative of the growing challenges that Apple faces in a maturing and evolving tablet market.
Follow Nathanael on Twitter @ArnoldEtan_WSCS