Mobile devices are evolving: What it means for retailers
February 5, 2015 10:43 AM
In the fourth quarter of 2013, global shipments of tablets from manufacturers to retailers were still speeding along at 20% year-over-year growth, according to mobile and emerging technologies research and consulting firm Strategy Analytics Inc. In the fourth quarter of 2014, however, growth in tablet shipments worldwide just about came to a screeching halt, a mere 1%, the research firm says. Strategy Analytics bases its tablet figures on discussions with and confidential figures from manufacturers, component vendors, trade associations and other tablet market players.
“The tablet market grew very large, very quickly, so most people who want a tablet in developed markets already have one,” says Eric Smith, senior analyst, tablet service, at Strategy Analytics, on the sales slowdown. “Tablet vendors have suffered from lack of innovation, which has delayed consumers from feeling the need to upgrade their devices. Emerging markets will face some pressure due to the growth of phablets, which are larger smartphones. But tablet vendors are changing their product portfolios to offer more 8-inch tablets, rather than 7-inch tablets, which are more prone to cannibalization by larger smartphones.”
Apple has been content with letting its new iPhone 6 (4.7-inch) and iPhone 6 Plus (5.5-inch) smartphones eat into sales of its iPad Mini tablet (7.9-inch) because smartphones are more expensive and consumers replace them more often, as they typically are tied to the renewal of wireless service contracts, Smith says. Making the iPad Air (9.7-inch) slightly thinner and slightly faster has not enticed consumers to buy more of the granddaddy of tablets, he adds.
“We still predict growth for tablets in 2015 and onward as consumers in developed markets replace their old models, enterprise users begin to find use-cases suitable for tablets, and new tablet sales continue in emerging markets,” Smith says.
TV and digital retailer ShopHQ not only racks up sales on tablets, it racks up sales of tablets. And it has observed a paradox surrounding tablets.
“Retail sales on tablets continue to grow dramatically even as sales of the devices level off,” says Tom Kraus, vice president of content and commerce at ShopHQ. He notes that the majority of ShopHQ sales on tablets continues to come from iPads, and that low-cost Android tablets do not even factor into m-commerce. “The early adopters of tablets have been in for a long time, and many are ready to upgrade. Larger phablet phones are a good stand-in for a tablet. At the end of the day, a tablet is a luxury device. The market is finite. Most require Wi-Fi, it’s an additional device to buy and maintain.”
Today, a smartphone is not an optional purchase for a great many consumers; plus, the cost of an exceptional smartphone has fallen significantly, Kraus adds.
“Like HDTVs a few years ago, tablets will always be a good, large business, but not the growth business it once was,” he says.
In Q4 2014, Android tablets accounted for 66% of tablet shipments, Apple iOS tablets 27% and Microsoft Windows 7%, Strategy Analytics says. Microsoft Corp. actually has experienced growth in market share year over year after a hit last year with the Surface Pro 3, Strategy Analytics adds. (Microsoft has not revealed actual sales figures for the device, but investment firms and analysts generally agree sales have been big.)
But the Surface Pro 3 is what is known as a convertible—a quasi-laptop that allows users to tear off the display (12-inch) from an ultra-thin base and use that display as a tablet. A Surface Pro 3 sells for about $900, in line with the price of a laptop (the MacBook Air sells for the same price) versus a tablet (the iPad Air sells for $500). That’s one rather large difference between a convertible and a tablet.
So, is a convertible a mobile device? Is a 12-inch tablet (the iPad Air is 9.7-inch) still a tablet? The growing popularity of the Surface Pro 3 and other convertibles, along with slowing tablet sales and growing sales of larger smartphones that approach the size of the smallest tablets (7-inch), bring up a question once thought answered: What is a mobile device?
The overwhelming majority of retailers and research firms always have counted retail sales occurring on tablets as mobile sales, because they viewed tablets as mobile devices. Many consumers do carry tablets with them throughout the day; some consumers even carry 7-inch tablets in their pants pockets. So tablets are in that sense “mobile.” What’s more, like smartphones and unlike desktops and laptops, tablets are touchscreen devices, use a mobile operating system, heavily feature mobile apps, and are part of a clearly defined mobile ecosystem (Apple iOS and Google Android being the giant ecosystems).
But studies show that most tablet use occurs in the home, especially on the couch in the living room or in bed. Consumers essentially are using tablets in more comfortable settings to replace desktops, which are chained to desks, and laptops, which are heavier and more cumbersome than tablets.
So is a tablet really a mobile device? And what about these convertible things—one minute they’re sitting on a table looking like a laptop, the next minute they’re in a consumer’s hands looking like a tablet.
“We have not yet made an attempt to distinguish convertibles from other devices; for us, traffic and sales from convertibles are just too small,” says Kraus of ShopHQ. “As for tablets, the retail sector has counted tablet sales as mobile sales almost from the beginning. I don’t see that changing anytime soon. Mobile sales is a very ‘sexy’ metric at the moment. We all want it to be higher.”
Sales made on convertibles are just lumped in with PC sales, says Eoin Comerford, president and CEO of Moosejaw Mountaineering. The apparel and sporting goods chain retailer tracks traffic and sales in three distinct buckets: mobile (smartphones and wearables), tablet, and desktop (everything else, including convertibles).
“We definitely see slightly different results for each of these three in terms of traffic growth, average order value, conversion rate, and so on,” Comerford says. “But tablets are closer to desktops in these areas than to mobile. I think most retailers still lump tablets into their mobile sales because that’s how they’ve always done it or because a higher percentage of mobile sales sounds good in boardrooms and on investor calls.”
That’s not to say tablet shoppers should not be tracked separately or that retailers should not continue to make it appealing to shop on a tablet, Comerford says. “The lack of hover-over ability and the use of swiping can make the experience much different from mouse-driven desktop experiences and therefore must be accounted for in all web design scenarios,” he says.
But factors like swiping and no hovering make tablets more like what? Smartphones, which, of course, definitively, are mobile devices.
James McQuivey, a vice president and principal analyst at Forrester Research Inc., is a longtime mobile industry observer. He believes there will, over time, be a reshuffling of categories. First, laptops will merge with tablets (and conventional laptop sales will erode) to create the hybrid or convertible category, McQuivey says. “The success of the Surface Pro 3 demonstrates consumers are ready to give up on big laptops in favor of more nimble, longer-lasting, keyboard-equipped tablets,” he says. “Apple’s next line of MacBooks likely will acknowledge this shift.”
Second, the desktop category will become purely desktop computers (which will incorporate touchscreen technology over time), McQuivey says. And third, there will be mobile devices (small tablets—not convertibles—and all smartphones, dominated by phones with what are today’s larger screens), he says.
“When Steve Jobs famously rejected the idea of a smaller iPad, it was completely disingenuous,” McQuivey contends. “He knew once people understood you could get 80% of a tablet’s value out of a smaller, cheaper form factor, two things would occur, both of which would be bad for the iPad. First, people would move to 6-inch and 7-inch devices to save money while gaining more mobility. Second, people would eventually merge the utility of the smartphone with the value of the tablet.”
Now the house that Jobs built, Apple, has itself embraced both of these changes and seen its own sales surge. And that is evidence that Jobs was wise to postpone this change as long as possible—and that Apple was wise to jump on board the change once it was clear the genie was out of the bottle, McQuivey says.
“Thus, the stalling trend in tablet sales is only going to increase—as will the size of smartphones,” he adds. “Jobs was right in at least this: There was a space between the PC and the smartphone that the tablet could fill, but only so long as the smartphone did not grow to become the tablet.”
Some experts look at device issues and just sigh.
“My bigger message to retailers: Stop the insane focus on attribution,” says Julie A. Ask, a vice president and principal analyst who specializes in mobile commerce at Forrester Research. “Focus on offering the best shopping experience for your customer. Mobile influence is your biggest opportunity, regardless of whether that’s a 5.5-inch smartphone or a 7-inch tablet. Counting dollars and attribution can be inhibitors to forward progress in delivering the types of experiences that in fact drive those dollars. Count the dollars later. Mobile is so inexpensive compared with a retailer’s other operations.”
Follow Bill Siwicki, editor of the 2015 Internet Retailer Mobile 500 and editor, mobile, at Internet Retailer, at @IRmcommerce and at @MobileInsiderBS.