Recently, we observed a Best Buy promotion that underscored a fragmented approach to selling tablets. It looks like the retailer is changing the lens it has been using to view the market, and we like the updated perspective.
Best Buy announced on April 14 in Minneapolis at its 2011 investor and analyst day that it is creating a dedicated location, called Tablet Central, within stores and online. The in-store experience will allow consumers to test and try tablets from makers such as Motorola, Samsung, RIM, HTC, and other unreleased products from the likes of HP and Toshiba as they become available. Apple will presumably continue to have a separate space for the iPad, but the company has not yet confirmed this. The Tablet Central locations will be completed at all Best Buy stores nationwide and online by early July 2011. Best Buy views the tablet market as a $12 billion opportunity, and it wants its share.
After an unsatisfactory experience trying to locate a Xoom shortly after it was released—and more recently a PlayBook—at our local Best Buy, and hearing from others that they had similarly confusing shopping experiences, we outlined retailer distribution challenges that could inhibit tablet shipment growth. While we continue to believe that there are challenges in terms of educating consumers and marketing the benefits and distinct advantages of tablets over notebook PCs, creating a separate section for tablets is a good start. It also happens to be convenient for Best Buy since the company faces some shelf space issues, particularly as its DVD, movie, software, and other media products draw less and less demand.
Giving tablets their own section is a good signal to consumers that tablets are different from notebooks and smart phones, and having them in one area where they can be compared and pitted against each other is a plus for the category. Going forward, the challenge will be for manufacturers and retailers to highlight how tablets are different from each other without frustrating consumers. That will mean highlighting applications and differentiating the usage benefits of devices from one another. This will entail a transition from the “speeds and feeds” approach to one focusing on user experience.
We continue to believe that Apple has a distinct advantage when it comes to distributing iPads, and this is likely to continue to be the case going forward. Apple is not only better able to explain its product to consumers through dedicated sales people, but it also captures more margin than competitors who have to share margin with retail partners. This makes it tougher for rivals to compete on price and awareness, which is especially important as we move into a new era of computing where the traditional lines of definition and differentiation are blurring.
However, this latest move by Best Buy is a good starting point, and it points the company and its tablet hardware partners in the right direction.