Business Insider blames ‘premium pricing’ for the drop-off

Apple iPad sales fall by 14 per cent

Apple’s iPad business is ‘going down the tubes’, according to Business Insider.

Ahead of today’s expected iPad 5 announcement, the website has posted an article stating that iPad sales have dropped 14 per cent year-on-year in the June quarter, and now sit at around 15 million units.

“Even after adjusting for channel inventory, iPad sales to consumers dropped 3% year over year,” continues the article.

The struggle of iPad sales this year was compared to June 2012’s sales, where the Retina-equipped iPad 4 boosted Apple’s iPad sales from 12 million to 17 million in that quarter.

Apple’s decreasing sales and loss of market share is said to be due to “premium pricing”.

“In short,” explains the website, “Apple’s iPads are too expensive.”

“By trying to maintain its premium pricing and high profit margin, Apple is likely losing sales that would otherwise help the company capture more of the mobile platform market.”

“This ‘premium pricing’ strategy is a departure from the strategy Apple has used for the iPhone and early iPads. (Those products were priced at or below the rest of the market). This is also a strategy that helped bury Apple in the earlier PC era — when it was charging premium prices for the Mac.”

Business Insider suggests that “the right answer” for Apple is to reinvest its profits into reducing the price of its iPhones and iPads.

“Apple is so phenomenally profitable that it could reduce its iPad and iPhone prices significantly and still coin money,” the website explains. “And, in doing so, it could also accelerate its unit growth and increase its global market share.”

"Doing this, of course, would further reduce Apple’s current profit and trigger additional declines in the stock price. But that doesn’t mean it’s the wrong decision for the long term.”

“The company will not likely be able to continue to own the dominant global mobile operating system while also trying to maintain its premium device pricing and profit margin. Gradually, as hardware competitors get better and operating systems like Android become more ubiquitous, iOS will become more of a niche player. Ultimately, if it becomes too much of a niche player, it will lose its value to developers and distributors. And if that happens, Apple is finished. If there’s no clear reason for consumers and developers to pay up to be in ‘the iOS ecosystem’, there will be no reason for consumers to pay up to buy Apple gadgets. The vicious cycle will feed on itself, and, ultimately, both Apple’s profits and market share will collapse.”

It remains to be seen how consumers, investors and analysts react following Apple’s event later today, but “regardless,” Business Insider says, “the new iPad product launch is important…”

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