Tom Keating at TMC reported today that Samsung is beating virtually everyone at virtually everything. He discusses how they have become the dominant TV maker but this isn’t such big news at this point. What is interesting is the company replaced Nokia as the number one producer of cellphones – not a huge surprise at this point but a huge milestone as Nokia held the coveted top spot for 13 years.
Why is Apple, a company with more consumer loyalty than just about any other company being threatened by Samsung? In a word, variety.
Apple got demolished in the PC wars of the eighties because the competition was brutal and Apple couldn’t keep up with the price/performance of all the computers flooding the market from Compaq, Gateway, HP and Dell.
Apple was one company competing against many and couldn’t be a Jack of All Trades. As it tried, it mastered few.
Today, in the smartphone world the issue isn’t so much price/performance – although this is an important area – it has to do with choice. Often screen size.
Many want a wider phone than Apple provides. Other consumers want a phablet. some want low-priced smartphones which have larger screens than the iPhone 4 or 5 provide.
Apple’s business model is more of building perfection – they make the best products they can without compromising excessively. And they charge premium prices for everything. I recently paid $39 for a Lightning to 30-pin adapter. Shortly thereafter I purchased a Roku HD for $49.99 or $11 more – if this pricing doesn’t scream highway robbery (sorry: “exclusive”), I am not sure what does.
Samsung on the other hand as well as Motorola/Google and HTC all compromise for the sake of giving consumers increased choice.
Of course Apple understands the concept of choice but they aren’t going nearly as broad as the competition and it’s hurting them.
Consider Toyota, a very successful auto brand also owns Lexus on the high-end and Scion on the low end. Being successful today requires giving increasing choice.
If you still don’t agree, you should have tagged along when my wife asked me to pick up Jell-O at the grocery store. The company makes 14 kinds of ready-made gelatin from strawberry to black cherry sugar free and 29 varieties of the brand you make yourself from apricot to watermelon. And pudding? There are an additional 66 types!
Point being – I have been salivating over non-Apple smartphones since the introduction of the wider-than-Apple Droid-X phone which I discussed in July of 2010. The title of the post was exactly, Is Apple Repeating its Mistake from the Eighties? Where I said:
This could mean over time that the Android ecosystem gets to be so big that the economy of scale will lead to a variety of devices which have a plethora of form factors which appeal to a large variety of users. As this happens, it is unclear if customers will stay married to Apple or switch to the ecosystem with the newer and cooler devices which seem to emerge every month or even every few weeks.
Could I be more clear? Could the situation be any more obvious? Cupertino does seem to be awakening to reality as the iPad Mini was a response to seeing consumers buy a large quantity of a product Apple didn’t think consumers wanted – the Amazon Kindle Fire.
I haven’t given up on my suggestion that Apple consider a wider-screen phone – a recent post from last month said the company needs an iLane Bryant Phone, my playful way of getting them to understand, sometimes it’s good to have a little junk in the trunk.
Although the company has seen its stock price get punished recently from over $700 to under $510, I am not concerned about Apple’s future as there is tremendous momentum going in Cupertino’s direction. What should keep Tim Cook and company up at night though is every non-Apple device which is sold whether it runs a RIM, Microsoft or Google OS. The war for the future hearts and minds of users, consumers and businesses is all about the ecosystem which includes apps, music, video, accessories, cases and more recently chargers.
And yes, margins may suffer on some lower-volume or entry-level products but ask Toyota how many drivers move up from Scion to Camry to Lexus.
Apple simply cannot afford to be absent from any sectors of the market which consumers want. To make matters worse, when they fail, the media skewers them as evidenced by the recent Apple Maps fiasco. In-short, it is impossible to be ahead of the entire industry as it grows in every conceivable direction – laptops, tablets, desktops, phones, phablets and not ever fail. It has never been done and likely won’t.
But the challenge for now isn’t so great. For Heaven’s sake, just come out with a wider phone to give people who gravitate towards the HTC DNA, Galaxy SIII and Note 2 a viable choice.