(All Things Digital) iPad 2 Sellout Sequel: This Time It’s Global

[frenzo142]

By John Paczkowski
Posted on March 28, 2011 at 3:33 AM

Here’s some news sure to furrow the brows of tablet market hopefuls. Once exclusive to the States, iPad 2 stock-outs are now a worldwide phenomenon. Just two days after going on sale overseas, the successor to Apple’s original iPad is in tight supply in many of the countries where it’s just arrived at market and nowhere to be found in some of them.​

(Full article here)

Hmm, IMO, this doesn't bode well for folks who held out with the hope that availability would improve here in the U.S. Several of my friends and family had hoped to get one in the coming weeks.

I can't help but wonder why Apple couldn't have created a bigger stockpile before beginning sales -- or if this is all a well-crafted marketing/PR ploy to keep the iPad 2 in the headlines while pushing out a few dozen units to stores and resellers each day to appease the strong-willed line-standers.

 

[GoCubsGo]

I think Apple does this on purpose, really. For me though, I waited just under 2 weeks and was able to walk in and buy one. If I were in the market and had to wait 4 weeks then so be it. I grew out of the need to buy every toy on launch day long ago.

 

[deeddawg]

I can't help but wonder why Apple couldn't have created a bigger stockpile before beginning sales -- or if this is all a well-crafted marketing/PR ploy to keep the iPad 2 in the headlines while pushing out a few dozen units to stores and resellers each day to appease the strong-willed line-standers.

I'm a firm believer in Occam's Razor and the simplest explanation is that ipad2 demand just plain exceeded Apple's forecasts. If Apple is concerned about the competing tablets, their best tactic is to put as many units in peoples hands as possible. If they're not concerned, then there's little logic to trying to keep it in the headlines.

Of course, the simple explanation is never as fun/exciting as some conspiracy theory though.

 

[smiddlehurst]

Hmm, IMO, this doesn't bode well for folks who held out with the hope that availability would improve here in the U.S. Several of my friends and family had hoped to get one in the coming weeks.

I can't help but wonder why Apple couldn't have created a bigger stockpile before beginning sales -- or if this is all a well-crafted marketing/PR ploy to keep the iPad 2 in the headlines while pushing out a few dozen units to stores and resellers each day to appease the strong-willed line-standers.

Uh, no, sorry don't agree with any of that. The simple fact is if Apple had stockpiled units all you're really doing is delaying the launch by x weeks and, instead of having units in customers homes you're storing them in a warehouse unused. That's a terrible business decision if you have a choice. Apple have basically decieed to get the device into consumers hands as quickly as possible and they should be applauded for that.

As for overall stock levels I think the simplest answer here is Apple misjudged demand (and/or had some initial production issues) and is now trying to up production while, at the same time, moving stock into new international channels for the launches in various countries. I suspect you'll see a pretty steep ramp-up of demand if things continue the way they are (and all other things being equal, like compnent supplies not being affected by the Japan disasters) but at the same time don't expect Apple to go ridiculous unless they're very, very sure that they'll be able to maintain high levels of demand throughout the year.

Also, and sorry if this sounds rude it's not meant to, if you know people that want to get an iPad in the coming weeks then why not simply order on-line? The Apple store is showing 3-4 weeks shipping dates at the moment, that's not too bad if you're not looking for a unit immediately.

 

[steadysignal]

I'm a firm believer in Occam's Razor...

Of course, the simple explanation is never as fun/exciting as some conspiracy theory though.

It surprises me the number of posters that use Occam's Razor in conjunction with a deflection of potential theories.

Not that its wrong, its just surprising.

And, to your last, you are so right. I think its why so many are taken in by potentialities; they hardly think something can be so simple - its almost as it they need it to be something more for it to make sense.

 

[deeddawg]

It surprises me the number of posters that use Occam's Razor in conjunction with a deflection of potential theories.

Not that its wrong, its just surprising.

I'm puzzled why this surprises you? Most conspiracy theories are founded upon assumptions of higher-than-normal capability or complexity. Occam's Razor, in the conventional parlance, suggests that of competing theories the simplest is the most likely.

Take for example the claim that allowing the so-called scalpers to keep showing up day after day was a ploy to get all the (supposedly) flawed initial production out of the US. Ignoring the assumption that the "Asian Gangs" were saturating every Apple store across the USA (and ignoring the units sold through Target, Bestbuy, and online), the reality (IMHO) is more likely that Apple learned their lesson last time they tried to put any sort of artificial limits on who could purchase and now just limit the quantity purchased at a single time. They got investigated for anti-Asian racism and called discriminatory because they wouldn't accept Diane Campbell's cash. Is seems much more likely that Apple would avoid any sort of possibly discriminatory purchase policy than that they had some clever scheme to encourage "Asian Gangs" to soak up and ship initial stock out of country.

 

[rdowns]

Take for example the claim that allowing the so-called scalpers to keep showing up day after day was a ploy to get all the (supposedly) flawed initial production out of the US.

LOLz. Most absurd thread on MR, at the moment.

 

[cmvsm]

Uh, no, sorry don't agree with any of that. The simple fact is if Apple had stockpiled units all you're really doing is delaying the launch by x weeks and, instead of having units in customers homes you're storing them in a warehouse unused. That's a terrible business decision if you have a choice. Apple have basically decieed to get the device into consumers hands as quickly as possible and they should be applauded for that.

As for overall stock levels I think the simplest answer here is Apple misjudged demand (and/or had some initial production issues) and is now trying to up production while, at the same time, moving stock into new international channels for the launches in various countries. I suspect you'll see a pretty steep ramp-up of demand if things continue the way they are (and all other things being equal, like compnent supplies not being affected by the Japan disasters) but at the same time don't expect Apple to go ridiculous unless they're very, very sure that they'll be able to maintain high levels of demand throughout the year.

Also, and sorry if this sounds rude it's not meant to, if you know people that want to get an iPad in the coming weeks then why not simply order on-line? The Apple store is showing 3-4 weeks shipping dates at the moment, that's not too bad if you're not looking for a unit immediately.

Apple is lucky that there are no serious competitors to the iPad, as their current distribution model is full of holes to open that door of opportunity for consumers to go elsewhere. The 3-4 week waiting period has only come online in the past few days. There are those that have been waiting for an online order since 3/11, while Apple is distributing to other countries, and refilling local retailers. To defend a business practice like that is ridiculous.

Apple should reinstate the pre-ordering system, and that would eliminate any issues of underestimating demand. It would also ensure that those who order an iPad, actually get one in a reasonable amount of time. 5-7 weeks is not reasonable by any measure. Neither is 3-4 weeks for early adopters, when other distribution channels are full.

 

[smiddlehurst]

Apple is lucky that there are no serious competitors to the iPad, as their current distribution model is full of holes to open that door of opportunity for consumers to go elsewhere. The 3-4 week waiting period has only come online in the past few days. There are those that have been waiting for an online order since 3/11, while Apple is distributing to other countries, and refilling local retailers. To defend a business practice like that is ridiculous.

Apple should reinstate the pre-ordering system, and that would eliminate any issues of underestimating demand. It would also ensure that those who order an iPad, actually get one in a reasonable amount of time. 5-7 weeks is not reasonable by any measure. Neither is 3-4 weeks for early adopters, when other distribution channels are full.

I'm sorry but what on what planet is that considered a bad business practice? That's the EXACT same business practice that the games industry has worked on for years. Same with cars, TV's, amps and every other high-demand item with a global market. Saying pre-orders allows a company to meet demand is ONLY true if you open up pre-orders months in advance as you need time to increase production and that, in turn, means announcing your product months before its available. Nintendo can get away with that (although, gasp, the 3DS is also running into stock problems, who'd have thunk it) as they HAVE to announce months and months before shipping to let developers build software for it. If Apple did that they'd find all the competition had caught up before they launched.

You claim that this model opens up the market to competition so answer me this: What gives the larger risk - a) launching ONLY in the USA until you can match consumer demand and get on-line orders down to 1 day lead time for all items, during which time there is litteraly NO iPad 2 presence in any other market and growing resentment at the company for favouring one market over all others or b) Launching in all your major markets within a small window and giving people a few weeks of lead time that, and this is important, YOU MADE PERFECTLY CLEAR WHEN THEY ORDERED!

Sorry but this attitude REALLY annoys me. It's self-centred, selfish, arrogant reasoning at it's absolute worse and thank god Apple (or any other company for that matter) knows better than to pay it any attention whatsoever. In fact, technically, all Apple have to do to address your complaints is to just say sod it and launch worldwide on the same day. Instantly removes all your complaints about not filling orders and putting units into international channels as everyone has an equal claim to them. The US, effectively, got a two week headstart on the rest of the world and certain people seem to have a huge sense of entitlement over that.

Let me put this another way... I ordered an iPad 2 on-line from the UK Apple Store within minutes of it going on sale and have an estimated delivery date of the 25th of April. I'm fine with that as I was advised before hand what the ship date is and it probably means I'll get a unit from the second batch of production (long, hard experience with Apple has told me that's a Good Thing). But here's the deal... those who ordered within an hour of the US launch date with very similar lead times will get their units two weeks ahead of me so it all balances out.

 

[elan123]

LOLz. Most absurd thread on MR, at the moment.

funny though!

 

[TheModerate]

Sorry but this attitude REALLY annoys me. It's self-centred, selfish, arrogant reasoning at it's absolute worse and thank god Apple (or any other company for that matter) knows better than to pay it any attention whatsoever. In fact, technically, all Apple have to do to address your complaints is to just say sod it and launch worldwide on the same day. Instantly removes all your complaints about not filling orders and putting units into international channels as everyone has an equal claim to them. The US, effectively, got a two week headstart on the rest of the world and certain people seem to have a huge sense of entitlement over that.

Let me put this another way... I ordered an iPad 2 on-line from the UK Apple Store within minutes of it going on sale and have an estimated delivery date of the 25th of April. I'm fine with that as I was advised before hand what the ship date is and it probably means I'll get a unit from the second batch of production (long, hard experience with Apple has told me that's a Good Thing). But here's the deal... those who ordered within an hour of the US launch date with very similar lead times will get their units two weeks ahead of me so it all balances out.

+1 from my perspective - in a way the easiest way to kill the scalping business is to level global market ineffectiveness the quickest way possible. If you look at the scalping, that comprises 2 components: Availability & Time.

By doing a world wide roll-out the availability is addressed (no need to go to the US to buy an iPad here if you can buy it at home)

It may impact the "time" component a bit adversely (you may have less stock on the US market) but I would consider the "time" variable less critical: if you buy off e-bay you realistically have to count a week (until bidding ends, you pay, the payment is confirmed, the seller get around shipping, the shipping is delivered etc.) and which point in time you may just as well go back to Apple's 3 weeks delivery time right now.

 

[deeddawg]

technically, all Apple have to do to address your complaints is to just say sod it and launch worldwide on the same day. Instantly removes all your complaints about not filling orders and putting units into international channels as everyone has an equal claim to them.

Yep. And then everyone will whine about lack of availability in the US.

Darned if they do, darned if they don't. I guess "haters gonna hate" turns into "whiners gonna whine" no matter what Apple does.

Last year, Apple checked passports and other items to try to stem the scalper purchases of ipads in the US for sales overseas. Their reward was to get investigated by Cuomo for claims of anti-Asian racism. Apple also got vilified for denying some woman the ability to purchase her ipad with cash.

So this time around they leave it wide open and sell two ipads per person in line until they run out... and people complain that they're not doing enough to prevent scalping.

Either way someone is going to whine about what Apple should have done.

 

[EdwardMoffet]

Apple is lucky that there are no serious competitors to the iPad, as their current distribution model is full of holes to open that door of opportunity for consumers to go elsewhere. The 3-4 week waiting period has only come online in the past few days. There are those that have been waiting for an online order since 3/11, while Apple is distributing to other countries, and refilling local retailers. To defend a business practice like that is ridiculous.

Apple should reinstate the pre-ordering system, and that would eliminate any issues of underestimating demand. It would also ensure that those who order an iPad, actually get one in a reasonable amount of time. 5-7 weeks is not reasonable by any measure. Neither is 3-4 weeks for early adopters, when other distribution channels are full.

Seriously, I would've bought a xoom already if it had apps. I just don't want to buy something and not really be able to use it for months and months.

 

[ftaok]

Last year, Apple checked passports and other items to try to stem the scalper purchases of ipads in the US for sales overseas. Their reward was to get investigated by Cuomo for claims of anti-Asian racism. Apple also got vilified for denying some woman the ability to purchase her ipad with cash.

Is this true? I don't remember that ... not that I'm saying it didn't happen. I do remember Apple limiting purchase to two units per person (lifetime) and requiring a credit card for purchase.

EDIT - Just read the huffington post article. that's pretty outrageous that they demanded passports. I guess the infraction was that particular Apple Store was asking for passports only of Asian customers. That's the complaint.

 

[JohnDG]

As for overall stock levels I think the simplest answer here is Apple misjudged demand (and/or had some initial production issues) and is now trying to up production while, at the same time, moving stock into new international channels for the launches in various countries.

I'm not sure it is either. IIRC they sold 15M iPads in the first 9 months, which figure to be around a 2.5M/mo iPad production rate towards the end of the period. If the analyst projections for ~42M iPad sales for the coming year are correct, then this means that Apple needs to build the iPad2 at a rate of 3M/mo increasing to 4M/mo towards the end of the window to meet these projections. For the iPad2 launch, they also had to change over production from the iPad, which gave them a bit of a dip in production capability at the beginning.

Does this mean they sold 2M iPad2 during the first two and a half weeks globally? If so, then they pretty much sold as many as they could build. I would suggest that they shouldn't build a 6M/mo production capability from the beginning if they are only projecting 40+M for the year.

I agree with the assertion that they are not holding any back: best to fill the (new) demand for tablets before their competitors can react.

jdg

 

[deeddawg]

EDIT - Just read the huffington post article. that's pretty outrageous that they demanded passports. I guess the infraction was that particular Apple Store was asking for passports only of Asian customers. That's the complaint.

Yes, two stores apparently, but not Apple Corporate Policy.

Nevertheless, having had that sort of bad press do you think Apple would do anything this time that could possibly be construed as a repeat of that sort of outrageous behavior?

As soon as you start doing something to pick and choose which customers are allowed to buy, or do something other than first-come-first-serve, you open yourself up to claims of favoring some class of people over another -- whether true or not.

 

[ftaok]

As soon as you start doing something to pick and choose which customers are allowed to buy, or do something other than first-come-first-serve, you open yourself up to claims of favoring some class of people over another -- whether true or not.

No, I absolutely agree. Apple can't do anything, other than perhaps instituting a "1 per person" policy until supplies aren't constrained.

Honestly, it's a no-win situation for Apple ... or at least as much a no-win situation you can have while selling millions of iPads in record-setting fashion.

In the end, everyone who wanted an iPad2 will get one, minus the few that couldn't wait or lost the desire.

 

[zoobaby]

I'm not sure it is either. IIRC they sold 15M iPads in the first 9 months, which figure to be around a 2.5M/mo iPad production rate towards the end of the period. If the analyst projections for ~42M iPad sales for the coming year are correct, then this means that Apple needs to build the iPad2 at a rate of 3M/mo increasing to 4M/mo towards the end of the window to meet these projections. For the iPad2 launch, they also had to change over production from the iPad, which gave them a bit of a dip in production capability at the beginning.

Does this mean they sold 2M iPad2 during the first two and a half weeks globally? If so, then they pretty much sold as many as they could build. I would suggest that they shouldn't build a 6M/mo production capability from the beginning if they are only projecting 40+M for the year.

I agree with the assertion that they are not holding any back: best to fill the (new) demand for tablets before their competitors can react.

jdg

While looking at the numbers you show, Apple should have had a good estimate for what the initial demand would be. They either purposely released unprepared to meet that demand or someone in there marketing team is very bad at their job.

Since I like my tinfoil hat and think Apple's marketing team is brilliant, I think they purposely released knowing they couldn't keep up with demand for a few months. The reasoning:

1. Keep demand high
2. Keep people excited to get to one
3. Those people that finally get one are super excited
4. So excited they got one so they show it off, generating word of mouth excitement
5.???
6. Profit - Solid sales by spreading out initial supply over 2 quarters. Nice for investors.

 

[frenzo142]

The reasoning:

1. Keep demand high
2. Keep people excited to get to one
3. Those people that finally get one are super excited
4. So excited they got one so they show it off, generating word of mouth excitement
5.???
6. Profit - Solid sales by spreading out initial supply over 2 quarters. Nice for investors.

YES! This what was I was getting at in as many words in my original post. Those folks over at Apple are very smart and shrewd, and I wouldn't put it past them to plan it out this way. After all, if you want to be successful, you should never give anyone a chance to stop talking about you. That, I believe, is the basis.

And I should underscore that I am not mad about it; I think it's brilliant. I love Apple and believe in their business model. And if they have to do whatever they need to, to continue their success, then so be it. In the end, it's all good for AAPL.

 

[EdwardMoffet]

YES! This what was I was getting at in as many words in my original post. Those folks over at Apple are very smart and shrewd, and I wouldn't put it past them to plan it out this way. After all, if you want to be successful, you should never give anyone a chance to stop talking about you. That, I believe, is the basis.

And I should underscore that I am not mad about it; I think it's brilliant. I love Apple and believe in their business model. And if they have to do whatever they need to, to continue their success, then so be it. In the end, it's all good for AAPL.

Do you happen to own AAPL stock? lol

 

[zgh1999]

As an AAPL shareholder, I would say that the scarcity of supply and the overwhelming demand are both genuine.

Apple and Steve are great!

 

[newagemac]

It's funny how the same naysayers who claimed that the iPad 2 was nothing special and that it wasn't much of an upgrade (no increase in screen resolution, camera quality, etc.) and/or that an avalanche of Android based tablets were going to take over the tablet market are now all of a sudden claiming that Apple should have known there was going to be this much demand for iPad 2 and should have been prepared for it.

Hilarious!

 

[goin3d]

I may have missed this in one of the above posts but don't underestimate the ipad2 release being timed a couple weeks prior to the close of the first quarter. With this timing Apple is able to sellout launch stock for it's first quarter earnings numbers, while carrying the initial rush over into the 2nd quarter. (Which explains why they shouldn't have waiting before they had more sitting in a warehouse before they launched)

 

[byeehaaw]

i'm not surprised at all.... way to go apple! haha