1.”The ‘i’ isn’t for ‘inexpensive.'”
A record 3 million people ordered the latest version of the iPad during the weekend after its debut on March 16 — the strongest launch for the device yet. With prices for the new iPad starting at $499 for the 16GB Wi-Fi only version, experts say consumers are paying a premium for the gadget. But they may not realize that premium could cover the cost of making a second iPad. IHS iSuppli, a technology research company that has studied the cost of the iPad’s components, estimates Apple spends $375.10 to make the 32GB version of the new iPad with 4G LTE connectivity — roughly half the retail price.
And the profit margin grows for the more expensive models. While it costs Apple about $16 more to make the 32GB version of the iPad than the 16GB version, the retail price jumps by $100 from one model to the next, according to the IHS iSuppli. That contrasts with competitors, like Amazon, which loses an estimated $18 for each $200 Kindle Fire it sells after marketing and shipping costs are taken into account, according to RBC Capital Markets. “Apple makes a stunning profit margin on their devices,” says Colin Gillis, an analyst for BGC Partners.
That said, the iPad has generally become more expensive to make while the price has stayed the same, meaning Apple is making less profit on its newer models, says Andrew Rassweiler, senior principal analyst for IHS iSuppli. He points out that iSuppli’s estimate doesn’t include all the costs Apple incurs for producing the iPad such as shipping, engineering teams, potential royalty costs and software. Apple also recently lowered the price of the iPad 2 by $100 to $399, a sign that it is accommodating cost-conscious consumers, says Michael Holt, an analyst for Morningstar.
Apple declined to comment for this story.
2.”I’m passe before you leave the store.”
If you got an iPad for Christmas you may already feel as if you need an upgrade given the hype around the new version’s improved camera, sharper screen and faster wireless network. The previous upgrade launched a year ago gave users a lighter tablet with a faster processor. (Apple put the weight back into its latest version.) For Apple fans, the frequent updates can lead to a constant case of buyer’s remorse, analysts say. “You can almost set your clock with the knowledge that Apple is going to release a new iPad every year,” says Allan Yogasingam, technical research manager for UBM TechInsights.
But the improvements from one model to another are incremental and not always easily noticed, says Yogasingam. For instance, tech experts raved about the new iPad’s higher resolution screen, but many regular users were unable to tell the difference according to an informal experiment conducted by the tech nology tracking sight The Next Web. When consumers were asked to look at two versions of the iPads side by side and point to the newest model, many chose the wrong one, reports The Next Web.
Most people might be better off if they act on every other update so they can notice a greater difference between devices, says Yogasingam. And iPad 2 owners may want to wait for the next upgrade instead of rushing out to buy the current new model. The next version, which is likely to launch next year, will probably have a faster processor and other features, says Louis Ramirez senior features writer for dealnews.com.
For Apple’s part, the company is typically working on several models of a product at once, so features left out of one version may already be in the works for a future model. “There is rhyme to their reasoning,” Yogasingam says.
3. “I can’t compete with your PC.”
The iPad may be new and hip, but experts say it still can’t replace your ho-hum computer. Indeed, for most people, it remains a secondary device. “It could be a mistake to assume that the iPad is going to topple the PC market,” says Gillis. Much of that has to do with the tablet’s limited applications for business purposes. While iPads are great for keeping up with the media and reading emails, producing and sending word documents and other files can be a hassle, says Gillis.
Gawayne Beckford, a 28-year old website developer based in Kingston Jamaica knows what Gillis means. He says his iPad is great for showing clients demos of his work. But when he needs to send someone an image, it’s a different story. Instead of simply replying to an email and attaching the file, he has to go through a multi-step process that involves opening a picture in another app and sending it from there. For that reason, he usually downloads word documents and writes emails from his computer. “It’s much faster that way,” says Beckford.
That’s not to say the iPad can’t be used for business. Indeed, it’s increasingly popular among doctors, executives and sales people who need to get updated reports or close deals on-the-go, says Sarah Rotman Epps, a senior analyst for Forrester Research. Studies also show that people who get tablets delay purchases of new computers, she adds.
4. “Good luck reading War and Peace on my screen.”
Reading on electronic devices like the iPad, Nook and Kindle revolutionized the publishing industry, with e-book sales now outpacing sales of hardcover books. But critics say some people actually get very little reading done on tablets like the iPad. Pop up messages, web browsing and video games often prove to be too much of a distraction for some users, says Ben Bajarin, principal at Creative Strategies, an industry analysis firm. Plus, many consumers still find it hard to read at length on the glossy screen, which creates a glare in the sunlight that makes it difficult for people who like to tote their books to the beach or the park, says Jeff Haynes, editor of TechBargains.com.
What’s more, digital devices like the iPad can cause computer vision syndrome, the name given to that tired, bleary eyed feeling people get when they spend too much time staring at a screen, says Dr. Jim Sheedy, a director of the Vision Performance Institute at Pacific University in Forest Grove. And, people who hold the tablets too close to their face could be forcing their eyes to cross, which increases strain, he says. Sheedy recommends people stick with the 20-20-20 rule: Focus on something 20 feet away from you every 20 minutes for at least 20 seconds.
To be sure, many users might find Apple has improved the reading experience with its new “retina display,” a higher resolution screen available on the new iPad that allows for crisper images and text, says Bajarin. The beige background used on most reading apps should also reduce strain while reading, he says.
5. “Drop me and I’m done.”
As many people toting around cracked devices will attest, the iPad’s Achilles heel is its glass screen. About 10% of iPad 2 users reported accidental damage within the first year of owning their tablets, according to insurance agent Square Trade, which analyzed data from 50,000 customers. That rate of breakages may increase with the new iPad, based on the results of a recent drop test the company performed, says Vince Tseng, vice president of marketing for Square Trade. Though both iPads shattered when dropped face down from waist height the new damage on the new iPad was more severe.
This fragility usually means consumers need to spend more cash on a protective case, which can make the sleek tablet feel bulky and heavy. That’s why iPad user Beckford was in the habit of leaving his iPad out of its iLuv Portfolio case while at home. That is, until a few weeks ago, when he accidentally knocked it off of a chair while it was charging. Now he has a semi-circle shaped crack along the length of the screen to remind him to keep the machine in the case. “It was painful, very painful,” says Beckford.
Apple could make the glass more durable by using a thicker version of damage resistance glass, says Haynes. Of course, iPad users might have avoided many of those incidents reported to Square Trade by exercising a bit more caution, says Tseng, citing one consumer whose iPad was damaged when her toddler threw it out of a moving car. And the iPad’s fragility has yet to stop people from buying it, says Rotman Epps.
6. “I’m not worth waiting in line for.”
Apple gets plenty of free advertising from the people who camp outside its stores before a new product launch. But some experts say that loyal consumers may be losing time and money. Wal-Mart, for example, upended Apple’s 8 a.m. launch time by making some new iPads available at midnight March 16. Other stores may allow you to earn bonus points or offer discounts on accessories, says Andrew Eisner, director of content for Retrevo.com. “They might be able to throw in a case or a charger,” he adds. Target credit card holders may be able to save $30 on a 16 GB 4G LTE iPad because they get 5% off of all store purchases.
That said, some consumers may find that salespeople at the Apple store are better prepared to answer questions about the iPad and better able to help shoppers choose between models or find the best accessories, says Eisner.
7. “My extended warranty may be a waste.”
AppleCare+ costs $99 and offers coverage for iPad repairs for up to two years from the purchase date. It also lets consumers replace two accidentally damaged machines for $49 each. That’s a steep price for coverage you may not ever need, says Jamie Lendino, senior analyst for PCMag.com. Plus, there may be other ways to replace a damaged iPad.
For example, a broken 32 GB iPad 2 with “serious physical damage” recently sold on Gazelle.com for $100. Meanwhile a used iPad 2 was available online on eBay for roughly $300. If the same person was buying and selling those iPads, they’d pay about $200 to replace the broken machine, not much more than the $150 one would spend with AppleCare+, says Lendino, “And you don’t have to spend the money until it happens.” Of course, some people might find the warranty and the second chance to replace their devices well worth it for the peace of mind, especially if they travel frequently or have young children, says Lendino. Others might appreciate the extended two years of technical support that’s also available through AppleCare+, he adds.
8. “I might make you a shop-a-holic…”
The iPad’s ease of use design also makes it easy to overspend, experts say. A recent survey of U.S. consumers by shopping site PriceGrabber.com found that 77% of tablet owners used their iPads and other tablets to shop. The popularity of shopping apps is also on the rise, with the average user putting seven shopping-related apps on their devices in March, up from three a year ago. And Apple users tend to be bigger spenders than other tablet owners — they forked over an average $123 in purchases on their iPads and iPhones, compared to an average $101 spent by Android users, according to a separate survey by RichRelevance, a personalized product recommendation company.
The portability of the iPad, combined with the overall pleasant browsing experience allows for more instant gratification, says Darren Vengroff, chief scientist for RichRelevance. “There’s no remembering to go to the mall on the weekends to buy those jeans you liked,” he says. People tend to use their tablets in relaxed environments like their homes, which might cause them to spend more, according to a report by Adobe Digital Index, which found that tablet users spend 20% more per purchase than people shopping on computers. Tablet owners also tend to be more affluent than most online consumers, according to the report.
9. “… and you’ll also spend a bundle on data.”
While the iPad is marketed as an on-the-go device, most use their iPads at home on the couch or in bed. Roughly 70% of owners use tablets at home, according to Nielsen. And the majority of tablets out there are Wi-Fi only, according to Forrester Research, which found that only 38% of tablet owners use 3G connectivity on their iPads. The majority of users, 53%, said they use Wi-Fi only.
Analysts say Apple is trying to change that by introducing the 4G LTE network for the iPad, a faster service available on AT&T and Verizon, says Rottman Epps. But that faster connection typically means it’s easier to use more data, and some users have complained of blowing through their monthly data plans in a matter of days. For users, that also means paying more for the 4G LTE iPad, which starts at $629 compared to $499 for the latest Wi-Fi only version. The faster connection requires a monthly bill ranging from $14.99 for 250 megabytes per month to $50 for 5 gigabytes through AT&T. People can limit their data usage by reserving most video streams and large downloads for when they can connect to Wi-Fi, says Bajarin.
10. “I have increasingly worthy competitors.”
The iPad may be the most popular tablet in the market, but analysts say competitors are catching up in market share and ability. The more affordable Kindle Fire quickly became the second hottest tablet in the market, helped in large part by its much lower price point, says Holt of Morningstar. “That seems to be the most effective weapon the competition has — the price,” he says. Indeed, more low-cost alternatives are hitting the market, including the $299 Pantech Element, which is waterproof and dustproof, says Michael Prospero, reviews editor at LapTopMag.com.
But some of the pricier competitors are also holding their own, say critics. Some techies view the $499 Asus Transformer Prime as the most powerful tablet on the market because of its Tegra 3 quad-core processor. (The Tegra 3 is faster in some respects than the A5X processor on the iPad, says Yogasingam.) Meanwhile, Apple seems to be addressing the price disadvantage by lowering the price on the older iPad 2 model.
Still, competitors may have further to go to beat Apple. With roughly 58 million tablets sold since the device was launched in 2010, the iPad is by far the lead tablet in the market. “You’ll see others try to differentiate themselves,” says Prospero. “But they’re coming from so far behind.”
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