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Discussion in 'iPad' started by xelaetaks, May 5, 2011.
anyone think apple is releasing ipad's in limited quantities to promote hype?
It even hurt their quarterly profit statement.
No. I believe they use hype and popular affection as a marketing tool - sales starting at 5pm to allow queues to build up for hours, whooping & cheeringly the staff as customers are taken into the store etc. But I think any shortages in supply are just that. They could sell twice as many and still be sold out.
Promote hype to sell a product by not selling it. Where's the logic in that.
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Apple is not excempt from the rules of Supply vs Demand, they can forecast as best they can but they can never be 100% certain.
If anyone is spending $500+ SOLELY because the demand is greater than supply, then this person needs help.
Given that their business goal is to sell as many as they can make then "sold out on purpose" is pretty accurate.
You also have to remember that they've been rolling out to an ever-expanding pool of countries, so the pool of potential buyers is getting larger.
I bet the demand was at least 2 million during the first week of iPad 2's release. It is pretty hard for a company to come up that number from one factory. The future strategy includes multiple factories (e.g. Brazil).
How many iPad's have been produced already? Remember that they have to produce extra for the Genius Bar. My guess is 5 million.
It will be interesting comparing future iPad's made in Shenzhen vs Sao Palo.
I can't believe people are still suggesting this nearly two months after launch.
The first week or so? I could maybe believe in a false shortage to get people interested. But it's been almost two months, there is more than enough hype, they want to sell the damn things. It's obvious that if more were available, more would have sold, and I'm sure Apple would have loved that.
Conspiracy theories are more exciting than the plain old boring conventional explanations. Some are just attracted to such, despite the illogic.
Seriously doubt it. Given Apple's tight controls on resellers as to what the iPad 2 can be sold for, there is no reason to to create a shortage.
Also Apple is in a tight spot given the popularity of their products. Meaning that they can't have Foxconn start producing in quantity months ahead of launch. Leaks are already a "problem" for Apple. Apple does not want to give too much lead time to competitors to potentially still their market share. Add to that given the uncertain economic times across the globe, no company can stockpile a new product in hopes that they have a new winner.
I know that it is hard to believe; but the consumer could have said so what to the new iPad 2; leaving Apple with slow sales. Not sure how many iPad 2's went to owners of the first iPad - but if myself and my friends are any indication - there were a lot of us!
I am so pissed at apple for screwing up. Dammit I'm still waiting on my ipad
Retail 101: the optimal number of units to produce is always exactly the number of people who will buy it (or rather, a little more to account for people who will buy it but don't know it yet).
If you have a limited supply, some people will purchase what they instead perceive as a substitute (for example, the Xoom). This will reduce your total sales.
If you have an overabundant supply, then you paid money for product that you're not making money on, which means that you're potentially operating at a loss.
To maximize sales, you want impulse purchasers to be able to make that purchase. If someone walks into a store and says "I like this, do you have any?", you always always always want to be able to say "Yes".
Any conspiracy theory about supply shortages for any big enough company--Nintendo, Microsoft, Apple, Honda--is propagated by people who have absolutely no idea how retail works. No business becomes that big making those kinds of mistakes.
(Caveat: there are some industries where "sell the most units" is not the goal. Art with limited prints falls in this category. But gadgets are not in this category.)
I think it's on purpose
I actually disagree with most of the people on this thread. I think Apple's shortages are perfectly on purpose. Here's my theory:
First and foremost, before anything else, Apple knows how to manage it's image. They've done a great job of making people want their products. They're not trying to simply sell iPads in the short term, their motivation here is more than that. They want the iPad to take over the market. They want iPad 3 to be even bigger than iPad 2. So why do they limit the market?
By limiting the market, you can do two things: First, you make the device more desirable to those who don't have it. People always want something they can't have. Even if they finally give up, and move on to another product, they're always going to wonder what they're missing with the iPad. If they wonder that, they'll eventually come back around and give it a shot.
Secondly, limiting the device somewhat will cause only those who _really, really_ want the device to actually go out and buy it. People who are only looking for a "tablet" device, and don't care whether or not it's the iPad, will ultimately buy the Xoom or something else. Sure, Apple loses their business, but guess what? Those people never cared anyways. What kind of P.R. could Apple possibly stand to gain from blasé users? Very little, indeed. They want their users to be enthusiastic about their device. Waiting for the device creates an attachment to the device before the device is even received. It builds a loyalty that's really hard to break in the long term. Hence the "Apple fan-boy". (How many Microsoft fan-boys do you know?)
Thirdly, limiting the device creates a community. Those who got the tablet are seen, in some sense, as outsiders, just like the kid who gets the Walgreen's version of the Wii instead of getting a _real_ one. Sorry, you're not in the club, because you don't have a _real_ iPad, you just have an "alternative". This desire to be in the club will ultimately drive the enthusiasm for the product higher and higher. Not only do you get to own something you don't have right now, but you also get to be in the club. Once you're in the club, you'll see the other members buying the upgrade, and so you'll want it as well.
Fourth, unsold iPads are liabilities. Apple has very little to lose by selling fewer, as long as all they produce are sold. Less revenue, sure, but less cost as well.
Lastly, scarcity drives price. The more scarce an item is, the more people are willing to pay for it. Plain and simple supply and demand.
It's genius if you ask me. Limit the stock severely, and then slowly, ever so slowly, increase production over a matter of years, not months. Apple has a long-term goal, not simply a short term one. Selling tons of devices right off the bat in the first few months is great and all, but they've done a good job so far of maximizing the mystery by not selling that many devices. Selling them heavily might work in the short-term, but Apple is interested in building interest over years, not just months. So, the device slowly becomes mainstream, but not before it becomes the stuff of legend. (Remember, a legend is easily broken by exposure.) And everybody wants to own a legend (I've seen people describing the iPad on this site as "amazing", "magical", "fabled", "legendary", etc. How many Dell computers bear that mark?)
And in the end, it wouldn't be that hard for Apple to spin up more factories, and for their suppliers to do the same. They just choose not to, in order to maximize the intrigue.
There are tons of reasons to limit supply, and I really, honestly, think that's what Apple is doing here.
I can't really blame them. They've got a great product to begin with. And I haven't even gotten my iPad yet. I'm still building allegiance before I've even received the thing.
You're welcome to your opinion, but a far simpler explanation is that demand simply exceeded even their top predictions. When building factory capacity you account for learning curves in capacity utilization efficiency (same capacity build produce more units later in the product lifecycle) and try not to overbuild your capacity in terms of ongoing production -- which can lead to shortages if initial demand exceeds projections, especially if that demand is sustained.
Most of the other points just aren't logical. Apple does a fine job of building hype and community with products that are not in shortage. A unit sold today is worth more than a unit sold tomorrow, intentionally turning away buyers with money-in-hand make zero sense. Plus, todays ipad2 buyers are more likely to buy an ipad3 due to lock-in via the Apple App Store. Push a potential ipad2 buyer to a different platform and lock-in is more likely to prevent a later platform change. Best tactic is put ipad2's in as many willing hands as possible.
Thirdly, you grossly underestimate the required times to build or expand production line capacity for complex products with multiple single-source or few-source component suppliers. Factories all up and down the supply chain don't sit around with hundreds of millions of dollars of idle capacity; they build or retool capacity to meet projected volumes and if there's a spike in demand it usually takes months to add the required capacity.
But does it increase actual sales? Generally, no.
Which is why they constantly crow about now many iGadgets they've sold on each call, each keynote, and so on.
No, I think a more likely explanation is that they want to sell more things, and generate more revenue. It's what their investors expect, it's what pays their salaries, and it's what they constantly brag about.
But does that translate to higher sales? (And thus, higher revenue)
What they have to lose is all those customers who aren't buying one. By your logic here, Apple should produce as few as possible, to reduce costs. This isn't how retail works: you want to match demand, not be ridiculously short.
Then why is one of the main competitive advantages of the iPad its price? Yes, scarcity drives price up in a macroeconomic market. But in this market, one of Apple's goals is to undercut competitors in order to gain a numerical advantage in the market (note the flurry of people surprised at how low-cost the iPad was last year) and to dominate it. You do that through lowering prices (through bulk discount et cetera), not by artificially raising them.
It's also bad retail.
Yes, and they very well may lose the long-term if they don't attain dominance now. If too many people can't get an iPad and instead go to Android, that hurts their long-term viability.
Factory and production management is more complicated than that. Firstly, it isn't just a flippant thing to convert a factory to iPad production; that takes time, money, and training your workers. Furthermore, if you ramp up too many factories, you very quickly reach a point of oversupply, causing that problem instead--and then you have even more factories you have to reconvert and retrain workers for.
Yes, and in the consumer-gadget/electronics market, they're all reasons that are used by companies that end up failing. There are times when shorting supply makes sense, but when your goal is to utterly dominate a market, establish a long-term platform, and to make tons of revenue, there are none. (And that tends to be the goal in consumer-gadget/electronics).
There is no way Apple is intentionally limiting supply (beyond basic factory-management) for the iPad 2. It is absolutely in their best interests to get the thing in the hands of as many people as possible before any competitors get there first. Shorting supply does not accomplish that goal, and it does not look good for investors.
I can still buy iPad 1 and they have to sell it at reduced price, possibly eating into their margins. The inventory build up of previous gen was faster than demand in the later days and they ended up with quite a bit of excess that had to be sold at - I don't know - no profit or very less profit.
Sounds logical then that Apple would want to be more conservative at manufacturing lesser than their previous estimates and keep the demand alive for longer time. They know people who want iPads will wait - so there is little risk of lost sales - and if they reduced the per month manufacturing targets such that they keep demand up for next month - they don't end up with excess inventory at the end of product life cycle.
"There are tons of reasons to limit supply,"
Sure, but none that make actual business sense.
I doubt it.... but it wouldn't surprise me. This is the company that takes down their website to add a new product just to generate buzz.... Every other company is able to add a new product on the fly to their website without taking down their whole online store (or they do it at an odd hour like 3am). But one of the most technologically advanced companies somehow cant do this
Yes, that's why Apple takes down the store at 3 am, because that is the prime time to generate the most buzz on the internet, when people are most likely to be asleep.
They could if they wanted to, I imagine so. But taking down a store for an hour in order to change product lines is very different from intentionally limiting supply.
Apple would not do it at an odd hour, because they do like to have it in the store as soon as it's announced, and no sooner, and they wouldn't want to wait until the end of the day. As to why they take it down at all instead of just dynamically updating it, there are some technical reasons that might be in effect (it takes X minutes to copy a full site over sorts of things), though I would be inclined to agree that yes, they do it for the fact that people notice.
But again, that is a very different thing. I seriously doubt it impacts their sales in any meaningful way. Not like not physically having enough product would.
And somehow they just happened to get a major natural disaster to affect a couple of their suppliers so that they had a solid excuse for all this.
PS Apple fanboys existed long before any shortages; heck, before it was cool to be an apple fanboy. My high school boyfriend was one in the days of OS 8. I became a fangirl right about the time Jobs turned to the company, just before OS X. They didn't need artificial shortages to drive the iPod to legendary status and change the industry, no reason they'd need them for the iPad.