Best Buy Chief Goes Public With Comments on ‘Crashing’ Tablets Market

Best Buy didn’t immediately respond to questions about its plans for its tablet mix for the second half, following an article by Walt Mossberg in Re/code Wednesday quoting CEO Hubert Joly on slumping tablet sales. “Tablets boomed and are now crashing,” Joly told Mossberg, saying volume has “really gone down” in the past few months. Joly cited a dearth of innovation in tablets that has given consumers little incentive to upgrade since tablets burst on the CE scene as a market “phenomenon” four years ago.

The comments reflect what analysts have observed this year. In a report this week, IDC analyst Jean Philippe Bouchard said the tablet market is “still being impacted by the rise of large-screen smartphones and longer than anticipated ownership cycles.” For Q2, Apple tablet shipments fell 10 percent worldwide while Samsung’s slipped 1.6 percent, said IDC. And Strategy Analytics reported last week that iPad sales had fallen to their lowest point in nine quarters during Q2 (CED July 24 p6). Moreover, Corning just Tuesday went public with concessions that it misread the faltering demand for Gorilla cover glass owing to a steeper-than-forecast decline in branded tablets (CED July 30 p6).

Globally, tablet sales are growing, but they're being fueled largely by low-cost models selling into emerging markets, IDC said, a finding also reported by NPD. For the holiday season, IDC expects positive growth in tablets, analyst Jitesh Ubrani told Consumer Electronics Daily, although it expects the growth rate of tablets in the commercial market to outpace that of the consumer segment. Still, consumers are expected to account for the majority of tablet and 2-in-1 shipments during the holiday season, Ubrani said.

Ubrani said tablet lifecycles have extended beyond what was initially estimated, “bringing them closer to PCs.” Press reports have suggested that the tablet is more of a “want” product than a product a consumer needs, “and there is certainly some truth to that,” Ubrani said. IDC will revise its tablet forecast at the end of August, he said, and while it still expects growth in tablets, “it will remain tempered,” Ubrani said.

Meanwhile, top-tier vendors like Apple, Microsoft and Samsung are jockeying to differentiate their tablets at the high end of the tablet market, but “so far we've seen their overall share decline as consumers tend to favor brands like Lenovo” that offer devices at “a great value,” he said. Prior to the launch of Samsung’s premium 8.4- and 10.5-inch Galaxy tablets this summer, NPD analyst Stephen Baker cited a period of “no growth” in the high-end segment of the Android tablet market (CED June 16 p1). The $399 and $499 price tags of the Samsung Tabs wouldn’t be as much a deterrent to consumers, Baker told us, as consumers finding a use case for an 8- or 10-inch tablet when they already have a 5-inch phone and a 12- or 14-inch notebook PC. In general, Baker told us, most tablets seem expensive to consumers compared with a high-end smartphone or a lower-priced notebook -- except for the entry-level Android segment where the average selling price last month was $80, he said.