Tablets Don’t Need to be $99 to Sell
A little over a week ago, HP decided to exit the WebOS tablet market and began to liquidate the HP Touchpad at the firesale price of $99. It should come as no surprise, these disappeared quickly. As I recently wrote, increasingly the future of tablets (and like devices) will be Web apps so good browser-enabled devices
will find traction within these markets if they are competitively priced. In the last 6 months I’ve constantly been asked what it will take to find traction in the tablet marketplace. I’ve suggested a $300-$350 price point would significantly stoke sales. A quick analysis of the secondary market pricing (ie eBay) of HP Touchpad’s suggest the $300-$350 price point is close.
I pulled data for 6,180 ended eBay auction listings for “16GB” “HP TouchPad” tablets. I narrowed my results by only including those listed as new. The closing prices ranged from a total price (closing price + shipping cost) of $110 to $1400. I excluded a few outliers that closed with a price below $110 or above $1,400. The data come from auctions ending on or between August 14th and August 27th.
I further narrowed the 6,180 observations by excluding all listings that didn’t end in a sale. I was left with 4,623 ended listings for a total value of 1,135,956.14. Here are a few summary statics and graphs of the underlying data.
Bids
Of the 4,632 listings nearly a quarter (23.8 percent) were ended with the Buy-It-Now option. An additional 12.4 percent ended with just one bid and 6.6 percent ended with a Best Offer price. A total of 69.6% of the listings ended with bids for a total of 60,469 bids. Remember I’ve excluded all listings that didn’t end in a purchase so we are only looking at purchased items. For the listings that ended with bids, the average listing received 18.8 bids and the median number of bids was 19.
Shipping
Shipping for the 4,623 listings ranged from $0.00 to $50.00. Of the 4,623 listings, 1,981 offered free shipping (42.85%). Including free shipping, the average shipping cost was $7.49 and the median shipping cost was $8.00. Including free shipping, 56.5 percent of the listings had a shipping cost below $10.
Price
The real story in the secondary market for HP TouchPad tablets is what happened to price and volume. Prior to the price cut, about 5 new 16GB HP TouchPad tablets sold each day on the secondary (eBay) market. Now, the secondary market is averaging about 600 tablets each day and this was nearly 1,000 completed listings on the Monday immediately following the price cut.
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Prior to the price cut, the secondary market price for HP Touchpads was about $350 – roughly 70 percent of the MSRP. With the official price cut, the secondary market price also fell quickly though it didn’t fall as low as the HP price of $99. The secondary market price dropped to and remained at about $250 – a decline of nearly 30 percent but still 150 percent above the liquidation price of $99.
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The $250 price point is a bit lower than the $300-$350 range I’ve been suggesting as the needed price point to significantly drive tablet unit volume. However, because some buying risks do exist for the secondary market, the price point for the primary market will naturally be higher than the price point in the secondary market. As I showed above, the secondary market had a 30 percent price discount to the primary market in advance of the price cut to $99. A simliar discount now would suggest a primary market price of $350.
Update: as TechCrunch reports, the cost on a Touchpad might be around $300 – close to the market clearing price. This uggests HP could sell the hardware near cost and cross subsidize with content sales.