Is the iPad Mini a dangerous business venture for Apple? Some experts seem to think so.
The danger comes from the cheaper price for the Mini. Several analysts have suggested that between 10 and 20 percent of Mini sales will be cannibalizations of the larger iPads’ sales. Sameer Singh, a writer for Tech-Thoughts, thinks it the rate will be significantly higher. He claims half of all iPad Mini sales will be cannibalizations.
This cannibalization means that Apple is earning new users, but losing potential profits. A chunk of consumers who would buy an iPad anyway will go for the Mini because it is cheaper.
His well-researched and reasoned analysis (which contains several nifty graphical aids) pulls from several sources to reach his extreme number. Most of his data comes from the recent patent infringement lawsuit between Samsung and Apple.
The iPad Mini, a 7.9 inch smaller sibling of the iPad, was released last week. Shipping delays have already been caused by the explosion of demand. Some lucky Apple-worshippers will get their fingers smudging away when they get the Mini in the mail on Friday.
Friday is also when the Mini becomes available at the Apple Store, your only current option if you want to be part of the exclusive group to get a hold of the much-hyped device. Expect long, long lines on Friday.
The basic model for the Mini will cost you $349, with more advanced features adding hundreds of dollars to the price tag. Still, that’s over $100 cheaper than the $499 iPad 3 will cost you.
Singh claims that when Apple released the iPad 3, the lowered cost of the iPad 2 bit significantly into Apple’s profits. The iPad 3 cost $499 while the price of the iPad 2 decreased to $399. Even though it was a year older, a section of consumers went for the iPad 2. Using data released from the Samsung/Apple litigation, Singh estimates that about 60% of iPad consumers went for the iPad 2 instead of the newer release. That’s pretty hungry cannibalization.
Singh goes on to show how this relates to the Mini: “Now that we have estimated the cannibalization impact of the iPad 2, it becomes far easier to understand the same for the iPad Mini. The cannibalization impact of the iPad 2 was primarily driven by the fact that it was priced $100 lower than the 3rd generation iPad. Now we have two levels of cannibalization, with an iPad Mini priced $70 lower than the iPad 2 and $170 lower than the 4th generation iPad. In addition to this, the iPad Mini is also available in far more storage options and configurations as compared to the iPad 2.”
From analyzing this data, Singh believes his 50% cannibalization rate has validity.