IPAD 2: Law of Supply and Demand

[Rumanji]

It seems like just a week after launch the Ipad2 is wildly successful, immensely coveted and yet the forum is ripe with posts about scalpers, overseas shipments, Apple botched the launch, we need rules against certain ethnic groups buying ipads, this just isn't "fair", it is immoral etc.

This is a classic case of Economics 101: Supply and Demand, nothing more, nothing less.

Supply and Demand is one of the most basic principles of our free market economy. It might be good for everyone that has a problem with this to review this basic economic principle:
http://en.wikipedia.org/wiki/Supply_and_demand
http://www.econweb.com/MacroWelcome/sandd/notes.html
http://www.investopedia.com/universi...economics3.asp

In reality there is no way to "control" or prevent this from happening and still remain a free market economy, although it could be minimized to a degree.

Apple could have had a sequential worldwide launch for the Ipad2. A sequential launch would have in large measure eliminated the issue of supply and demand and therefore scalping. Theoretically this sounds like a great idea, but it is really not possible, nor practical and will never happen.

1) Apple is a marketing company every bit as much as they are a technology company and a staged launch creates massive amounts of free publicity. Apple loves this. I firmly believe that Apple hated the fact that the Verizon iPhone 4 didn't have any waiting lines and were freely available.

2) From a manufacturing standpoint it doesn't make sense either. It is crazy to consider the amount of resources that would be tied up to stockpile 5 or 6 million or even more Ipads prior to launch. They may need as many as 15 million initially on launch to match the current demand without affecting the price on the secondary market. The logistics are mind boggling without even considering the financial cost.

3) How much physical space would be needed to store 15 million ipads? It is hundreds and hundreds of thousands of square feet of building space, management, racking, HVAC etc. It is the equivalent of approximately 2,500 semi tractor trailers to transport it. Apple realizes HUGE savings by shipping product immediately after it is manufactured. Storing finished product costs money.

4) With a current monthly production capacity of approx 2.5 million units, we would have to wait approximately 6 additional months for the launch. Apple is very keen to the timing of their products relative to their competitor's products. What would happen to their market position if the Ipad2 launch was delayed 6 months?

5) There are many other points to consider. For example, who would want to get an ipad with a battery that has been sitting for 6 months or more? What if they discovered a manufacturing issue or defect at the moment they finished the last ipad before launch?

These numbers are all just approximates, but prove the point that logistically a sequential launch of such a wonderfully popular product just isn't feasible not practical.

My last point is that the law of supply and demand surrounds us in everything we do, it is inescapable. Have you ever watched the stock market on the launch day of a very successful IPO? What will happen to the price of Facebook on their IPO day if/when they go public? Will the price open at say $15.00 and remain there? Not a chance...
If you show up 5 minutes before the stock market closes, do you really expect to be able to buy it at $15.00? I dont...

Why does the price of gasoline flucuate? How about airline tickets or concert tickets? Real estate? Why do MLB Pitchers make more than high school teachers?

As long as we live in a free market capitalist society, these struggles of price and availability will exist and I personally view that as a good thing. It is ironic that in a socialist society shortages are actually very common.
There isn't anything immoral or wrong about it, it is a free market. You can chose to play or you can sit on the sidelines and wait. This isn't Apple's problem nor can they control or eliminate it. A rule of not selling to this particular ethnic group or another will not solve it, it would actually just make it worse.

The imbalances in the Ipad 2 will fade and cease in a few months, just as they did with the Ipad 1, the iphone 3, iphone 4 and countless other products.

If you just can't wait to have one (perish the thought...) you have a couple of choices; get up very early or camp out overnight in line or pay the aftermarket price and get it immediately. Whining or complaining about it isn't really a choice, it is just useless whining. Apple can't fix this because it isn't a problem per se, it is the logical result of a very successful product in a free market society.

For the record, I camped out overnight.

JMHO

 

[PadJunkie]

Well! You are obviously just a shill dispatched here by Apple to help cover up their massive launch day conspiracy. How many iPad 2s did they have to allocate from their secret cache to buy your cooperation? How many???

 

[Rumanji]

Well! You are obviously just a shill dispatched here by Apple to help cover up their massive launch day conspiracy. How many iPad 2s did they have to allocate from their secret cache to buy your cooperation? How many???

LOL!!! Thank you for that funny but extremely irelevant post. It did make me literally laugh out loud!
So you really think that? Wow...just wow!

 

[nStyle]

LOL!!! Thank you for that funny but extremely irelevant post. It did make me literally laugh out loud!
So you really think that? Wow...just wow!

You were educated enough to start this thread, but can't recognize sarcasm? I realize it is over the internet, but still.

Anyway, I don't know how most people would perceive the purpose of your post, but as far as scalpers go, more power to them. Can you blame anyone for trying to make an extra buck in this economy?

 

[Rumanji]

You were educated enough to start this thread, but can't recognize sarcasm? I realize it is over the internet, but still.

Anyway, I don't know how most people would perceive the purpose of your post, but as far as scalpers go, more power to them. Can you blame anyone for trying to make an extra buck in this economy?

Oh i get the sarcasm.

My purpose? Well i slept out all night last night...with a bunch of others. Some scalpers, some not. Everyone deserved to be there, no matter their intent, or their background, nationality or ethnic origin. And after reading some of the almost rabid posts here that really border on racism and prejuidice i decided to try and bring a little different take to it.

 

[PadJunkie]

Oh, i get the sarcasm.

I suppose it is sarcasm, though I didn't really intend it as anything other than a joke. My point was directed at the conspiracy theorists, who generally seem to be unaware of basic economic concepts.

It's disheartening to see so much baseless rumor-mongering in this forum. No wonder Apple has a "never discuss anything" policy.

Mind you, this is coming from someone who waited 5 hours in the rain and has no iPad.

 

[zenio]

At the end of the day Apples focus on marketing as their one area of expertise is brilliant. They've learned the only thing that matters to them. Something many companies fail to do. It's no longer about technology for Apple since they've got good enough. It's really about controlling perception. Power, control & marketing are Apples strengths. Everything else is of little consequence to them.

 

[spacepower7]

The problem is that the loyal Mac users that have been using Apple products for 25+ years have been the underdogs for years.

We're the "different ones" feeling a closeness in ideas and values of Apple, meaning not cut-throat businessmen like Microsoft and IBM. We're not buying extra iPads that we don't need to make some cash. People who do that are obviously not smart enough to contribute positively to society with there own ideas and innovations. Hence their societal value is low, therefore then need the extra money.

We, Mac users, have had a sense of unity being a minority. That's all changed since iPods and iPhones and the typical jerks of the normal world now come invade our message boards and preach to us. I can usually guess a poster's membership date pre-2009, or the later members by their arrogance and sense of entitlement written in their posts.

It's like all the jerks from Engadget and Gizmodo now come to Macrumors. Is it me or are people on the internet getting ruder over the last couple of years?

I'm glad that the OP went to his economics 101 class, but a there is much more to economics than you are acknowledging. I used to preach like that when I took my first econ class in high school. That was a years after thinking communism was good, because it was fair (never in practice though ie USSR, China, etc...)

Also
Apple sold many Verizon iPhones and could care less about the lines on an 8 month old product. They set records for any Verizon release. The only people who cared about the lines were WallStreet, TechBlogs and their angry youth readers.

The bit about racism..... I think that I read some of those posts and I don't believe the people intended it to sound that way, they were just frustrated.
I think that they were pointing out that the people were buying the iPads to resell, and the people who would actually keep and use them are not able to get any.

 

[Ca$hflow]

I didn't understand the point of this point. Was it that your frustrated at the iPad2 perceived shortage? The answer is to stalk pile iPads? That would be dumb from a business perspective in the sense that no company wants to put more money than they have to in inventory. What was your solution?

 

[bossxii]

I maybe way off here but i think the frustration is coming from the fact there was basically no pre orders as many if not all previous Apple products have been made available. I reserved the first iPad at the local Apple store. Launch day came I did show up a few hours ahead, 5 am for a 7 am opening. They formed two lines, one for reserved and one for non reserved. They let everyone know they had xxx amount and those beyond that in line at least knew they won't be getting one. Those that reserved one more than likely would, which a little pre planning paid off.

This round IMO was a cluster #*%k of planning on Apples part. They had know way of knowing the demand without taking pre orders online a week prior and set themselves up to piss off a few people that may wait, or may find what is available in a tablet. I don't know if it was intentional or just poor planning.

Not that Apple cares about one instance like my own, and for the record I have an iPad 2, but I did not only consider but "while waiting" purchased a Xoom to check out the competition. If anyone knows about marketing, the last thing you want to do is allow your competition to get a foot in the door and have a chance to snag a customer. Lucky for Apple the Xoom and Honeycomb were largely overhyped and they have no real competition in the market yet.

Bottom line is could Apple have handled and organized the iPad 2 release better? I think that answer is yes based on the past three years of Apple iphone and ipad product launches.

 

[jll62]

The problem is that the loyal Mac users that have been using Apple products for 25+ years have been the underdogs for years.

We're the "different ones" feeling a closeness in ideas and values of Apple, meaning not cut-throat businessmen like Microsoft and IBM. We're not buying extra iPads that we don't need to make some cash. People who do that are obviously not smart enough to contribute positively to society with there own ideas and innovations. Hence their societal value is low, therefore then need the extra money.

We, Mac users, have had a sense of unity being a minority. That's all changed since iPods and iPhones and the typical jerks of the normal world now come invade our message boards and preach to us. I can usually guess a poster's membership date pre-2009, or the later members by their arrogance and sense of entitlement written in their posts.

It's like all the jerks from Engadget and Gizmodo now come to Macrumors. Is it me or are people on the internet getting ruder over the last couple of years?

I'm glad that the OP went to his economics 101 class, but a there is much more to economics than you are acknowledging. I used to preach like that when I took my first econ class in high school. That was a years after thinking communism was good, because it was fair (never in practice though ie USSR, China, etc...)

Also
Apple sold many Verizon iPhones and could care less about the lines on an 8 month old product. They set records for any Verizon release. The only people who cared about the lines were WallStreet, TechBlogs and their angry youth readers.

The bit about racism..... I think that I read some of those posts and I don't believe the people intended it to sound that way, they were just frustrated.
I think that they were pointing out that the people were buying the iPads to resell, and the people who would actually keep and use them are not able to get any.

Huh? Long-time Apple supporters, those who stuck by the company during the lean times, are no more entitled to a product than the resellers or the folks new to the platform. Shortages of this nature are the price to pay for having popular products. People that truly love Apple should be celebrating the wild successes the company has had as of late. Instead, posts like the one above simply show that people once again get uncomfortable when their small clique gets exposed and made larger. You want to stay in your nice little Apple fan comfort zone because it defines you somehow. Your argument isn't about Apple, it's about your shortcomings and need to belong to a special group.

Personally, I love Apple and wish the company nothing but success. I ordered an iPad 2 early and was in the 3-5 day shipping allotment. However, I also waited in line on launch day for 2 hours and got what I wanted. I only purchased one and I cancelled my online order from my iPhone when I got to the front of the line. I made a decision to leave more product for others, but I don't for one moment begrudge those that are buying to resell.

 

[jll62]

I maybe way off here but i think the frustration is coming from the fact there was basically no pre orders as many if not all previous Apple products have been made available. I reserved the first iPad at the local Apple store. Launch day came I did show up a few hours ahead, 5 am for a 7 am opening. They formed two lines, one for reserved and one for non reserved. They let everyone know they had xxx amount and those beyond that in line at least knew they won't be getting one. Those that reserved one more than likely would, which a little pre planning paid off.

This round IMO was a cluster #*%k of planning on Apples part. They had know way of knowing the demand without taking pre orders online a week prior and set themselves up to piss off a few people that may wait, or may find what is available in a tablet. I don't know if it was intentional or just poor planning.

Not that Apple cares about one instance like my own, and for the record I have an iPad 2, but I did not only consider but "while waiting" purchased a Xoom to check out the competition. If anyone knows about marketing, the last thing you want to do is allow your competition to get a foot in the door and have a chance to snag a customer. Lucky for Apple the Xoom and Honeycomb were largely overhyped and they have no real competition in the market yet.

Bottom line is could Apple have handled and organized the iPad 2 release better? I think that answer is yes based on the past three years of Apple iphone and ipad product launches.

Two points. One: Apple knew exactly what their launch day inventory was going to be and I think they realized that pre-orders and immediate shipment online orders would have likely eaten into a significant portion of that. This would leave very little stock for retail stores on launch day. The lines were going to be long regardless of pre-order availability, so I believe they made a decision to make sure there were as many devices available to those customers waiting in lines. I can't find any fault in this. It would have been far worse if there were only 20 per store.

Point two: While creating intense demand is great, no company wants to create such a shortage that it drives people to competitors products.

 

[IbisDoc]

blah blah blah......thanks for the condescending supply and demand links chief. Now back to the real (non psycho-fanboy) world.

 

[MikePA]

If the same people whining about scalpers and having to get up so early, multiple times, to stand in line had gotten up early ONE day and ordered online, they would have their iPad2 already. I do and it arrived one day earlier than FedEx said it would.

 

[nonameowns]

not only that but components required to make the ipad 2 from other countries. Japan is one of them.