More Innovation Needed in a Mature Tablet Market
Last year, CCS Insight predicted that growth in tablet sales would slow considerably during 2014 (see Global Tablet Market Forecast to Slow to 28 Percent Growth in 2014). This has been the case during the first half of this year, and the slowdown is greater than we had originally forecast. After three years of strong growth, many households with a tablet have seen little benefit in upgrading to newer models. This is in contrast to the highly-subsidized market for smartphones in which subscribers upgrade at regular intervals.
In an interview yesterday with Walt Mossberg, Best Buy’s CEO Hubert Joly said that the tablet market has gone from boom to bust — from phenomenal growth to a crash after only three years. Mr Joly’s particular choice of words exaggerate the situation, but a significant decline in sales growth is evident. CCS Insight expects global volume sales to grow by 14% during 2014, compared with the 79% during 2012 and 71% during 2013 recorded by CCS Insight analysts. It’s important to emphasise that the global market is still growing and isn’t in decline, but that some of the most advanced tablet markets are flat or declining (see Tablet Market Softens in 2014 But Outlook Remains Strong).
The tablet market has reached a level of maturity in near-record time since the devices became mainstream in 2010 with the release of the first iPad. Best Buy’s CEO stressed in the interview that there has been little innovation during the past year to entice consumers to buy replacement tablets. The robust build of the devices and their cloud-centric architecture means that there is no strong upgrade incentive. CCS Insight has previously highlighted that the replacement rates for tablets is slower than for smartphones.
Mr Joly spoke in reference to US sales, but CCS Insight has also seen a significant slowdown of tablet sales in Western Europe despite the plethora of cheaper models on the market. In the UK, for example, we expect a volume decline in tablet sales of 14%, and for most Western European markets to decline as well. We’re encouraged to see sales pick up in some developing markets, but note the differences in penetration rates of many of the enabling technologies, such as Wi-Fi, meaning that such markets can’t be relied on to pick up the slack.
The honeymoon for the tablet market was short. As Best Buy’s CEO stated, the market could use a spark of innovation.
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