Is the iPad mini Too Expensive?

After months of speculation Apple has finally unveiled a smaller iPad, the iPad mini. Like the iPhone 5’s release, there were few surprises about the hardware as most of it had been leaked well in advance. The only shock was the price. Starting at $329, the iPad mini is much more expensive than other similarly sized tablets which start at $199.

Why is it so much?

First of all, Apple cannot price match Amazon and Google at $199. The Kindle Fire HD and Nexus 7 are sold at (or pretty close to) cost as each vendor intends to make money selling content and displaying ads. Apple makes its money on the hardware so they cannot sell at cost. You can argue which business model is better, but Apple’s model seems to have been working out pretty well so far.

Even if Apple has to charge more to make a profit, $329 seems like a lot more more and needs to justify it. I think the pricing comes down to who is Apple selling this product to. The iPad mini is marketed to people who want an iPad (note I said an iPad, not a tablet) but think the 9.7″ device is too big, or too expensive. If you wanted an iPad and size or price was your issue, then Apple now has a solution for you.

If you were looking for the least expensive tablet around, then Apple can’t help you and appears to be willing to lose you as a customer.

Hardware differences aside, the big difference between these tablets comes down to the ecosystem behind it. Apple, Amazon, and Google each have their own stores of apps, music, movies, TV shows, and books. Apple’s offering is unique in that it offers 275,000 apps which is way beyond Google’s or Amazon’s. I believe this is why they feel they can charge such a premium.

Is the price too close to the iPad 2?

Another issue brought up is that at $329 the mini is only $70 less than the 9.7″ iPad 2. If you’re spending over $300 anyway, why not just spend a little more and get the larger tablet?

John Gruber points out that it is interesting to compare the iPad mini to the iPod mini introduced eight years ago. The iPod mini was introduced a couple of years after the iPod but was smaller, had less storage capacity, and cost $50 less than the full sized iPod. Pundits complained the iPod mini was too expensive for what it offered and too close in price to the full iPod to be attractive. But customers loved it and it went on to be a big success. Form factor is an important selling factor. Also, $50 or so dollars can be reason enough to influence a purchasing decision.

Is the price of the iPad mini ever going to fall?

This report at Business Insider says that Apple is having a hard time getting the new 7.9 inch displays. Speculation is that the high price is a way to control demand until supply can catch up. So can we expect a less expensive mini in 2013? Possibly. Apple did famously drop the price of the original iPhone from $599 to $399 three months after its introduction (grrr…), so there is precedent for a price drop shortly after a product’s introduction.

Any price drop will have to do with product demand. If the mini is a huge hit and Apple can’t keep them on shelves, then why drop the price? If demand starts to fade then a drop down to $299 may be in the cards.

Conclusion

The iPad mini looks like a solid product but the $329 price may be a deal breaker for bargain shoppers. Apple is taking a gamble on pricing the mini so much higher than similar products. There is a saying that “customers don’t want tablets, they want iPads”. Apple is banking on that being true.

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About Lee J.

Mobile Guy!
This entry was posted in Analysis and tagged , . Bookmark the permalink.

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