Why the iPad’s Not Sold Out (Yet)
In late January, Apple announced the iPad—a tablet computer anticipated roughly as much as the first iPhone—and last week, it opened iPad pre-orders solely to customers in the United States. Questionable reports initially suggested production-related hardware shortages and predicted first-day pre-order sell-outs, both implying that on-the-fence potential iPad customers would be left waiting for a delayed second shipment if they didn’t sign up quickly. But that didn’t happen: three days after pre-orders opened, Apple’s web site still shows that iPads can be ordered for launch day delivery, or reserved for launch-day in-store pickup. If you’re willing to believe third-party estimates that haven’t been verified by Apple, roughly 120,000 to 150,000 people pre-ordered iPads, well short of Apple’s supposed initial production run of 600,000 to 700,000 units.
This isn’t necessarily bad or surprising news—again, assuming that it’s accurate—and Apple appears to have anticipated as much, at least somewhat. Back in February, Apple COO Tim Cook disclosed that the company would deliberately limit initial iPad sales to stores where properly trained sales people would be available to answer pre-purchase questions about the device, a point that we called out as important on Twitter: unlike the iPod, which can be found almost anywhere, or the iPhone, which can be purchased even from Walmart, this suggests that Apple knows that this particular product is not going to sell itself. It is an acknowledgement that most people are going to need to actually put their hands on the iPad and try it for themselves before wanting to commit to spending $500 or more to buy it.
Though it’s easy to forget this in the wake of the iPhone’s subsequent success, the launch of the first iPhone was not the sort of unqualified success Apple had hoped for. It was wildly hyped, camp-out lines were formed, and there was a lot of talk about the $500 iPhone becoming some elite, uber-luxury device. But it actually took Apple two and a half months to sell the first million iPhones, an announcement that came only after it chopped the price by $200 and incurred the wrath of the first wave of early adopters, who saw their “elite” status rapidly disappear. Armed with more aggressive pricing, more educated consumers, and wider distribution, Apple now sells a million new model iPhones in the first three days. Having an iPhone isn’t about being “elite,” and Apple finally seems to realize that being the biggest player in the market early and selling more units is more important than skimming an extra $100 from the first customers.
Viewed from one perspective, the task Apple has to accomplish with iPad sales is more of a challenge than the iPhone. It announced the iPhone noting that 1 billion handsets were being sold annually, and said that it was aiming for 1% of that market, or first-year sales of 10 million units. Tablet computer sales are nowhere near the billion units per year level, and many people have no idea that they need a tablet yet. Moreover, Apple is approaching this comparatively nascent market from a completely different angle: rather than offering a product that outperforms existing products (old model smartphones), it has developed something that radically simplifies low-end computers (netbooks) while underperforming them on certain key specifications. Consequently, its “magical and revolutionary product” pitch seems to be aimed not at the most tech-savvy users, who have openly chuckled at the iPad’s marketing, name, and specs, but at the mainstream consumer who finds existing computers too intimidating and wants something simple and affordable that just works. Magically, even.
Mainstream consumers weren’t sitting on the Internet last Friday morning waiting for Apple to open pre-orders. They don’t need to be the first people to buy Apple’s products, and when we spoke with a few of them last Friday, they indicated that they could and would wait until they could go into Apple Stores and try the iPad for themselves before making a decision—probably not even during the first few days, when there might be lines to wait in. But they’re willing to be convinced, specifically by seeing great stuff running on the iPad, to make a purchase. For this reason, iPad pre-sales are not a reflection of how successful this device—and family of devices—will ultimately become. Once people go into Apple Stores and actually use iPads, they’ll most likely sell themselves, assuming that Apple has the right demonstration software installed, and employees in place to answer questions. After that, pricing adjustments and new features will be the way iPads take off.
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