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Increased tablet competition could hurt Kindle Fire, not iPad

Tablets are likely to be high on consumers? wishlists this holiday season. However, unlike last year ? when the tablet market was dominated by the iPad ? and Kindle Fire ? the space will be much more competitive this year with a host of new entries. 

As more companies enter the tablet space, they are educating consumers about the benefits of the device and bringing new customers into the market. The increased competition is likely to impact how existing players perform this holiday season, with the Kindle Fire possibly taking a hit while the iPad will remain strong.

?This holiday season, we will see new competitors trying to grab some market share away from Apple,? said Peter King, London-based director of tablet and touchscreen strategies at Strategy Analytics.

?The Google Nexus 7 has a good specification and we expect it to perform quite well, at least in the U.S. market, where there is content available for it, which is not true in many other countries,? he said.

?Amazon will have next generation tablets and again will make a big play for market share. Apple will also have a newer smaller, cheaper tablet and so will prove to be awesome with a range running from $299, $399, $499 and upwards.?

Tablet shipments, sales up
There will be a much richer competitive ecosystem in tablets this year with a wider range of vendors, including new products from Google, Microsoft, Samsung, Asus and Acer.

Tablet shipments are also expected to be up about 30 percent year-over-year in the fourth quarter, according to ABI Research.

With consumer interest in tablets growing at the same time, this means sales are likely to be strong overall for tablets this year, although not up as much as they were last year.

?In these early years of the tablet category?s life, it is consumers who are driving sales,? Mr. King said. ?As tablets make great gifts, we see seasonality heavily skewed towards the Q4 Holiday season.

?In Q4 2011, sales were up 151 percent year-over-year. We expect Q4 2012 to be up 57 percent year-over-year,? he said.

The increased competition is good for consumers in that it will drive prices down. For example, the new Google Nexus 7 tablet is being offered for $199, which is on par with what the Kindle Fire goes for and significantly lower than the $499 to $829 that the iPad costs.

The Google Nexus 7 tablet could make an impact this holiday season.

?The Google Nexus tablet is a very competitive product,? said Jeff Orr, group director of consumer research at ABI Research, New York. ?It doesn?t offer anything different or leading edge that other Android tablets are not capable of but the price helps.

?It converts some people who were not quite sure if they wanted to make the jump into a tablet,? he said.

?Google could be a surprise here. I think people are looking for a straightforward product that is easy to use.?

New Kindle tablets
Microsoft, which recently introduced its first tablet, is not likely to have a big impact on holiday sales for tablets for a couple of reasons. First, the Windows 8 operating system is not supposed to be introduced until the middle of October, which means any tablets built on the new OS will be introduced pretty late in the game.

Additionally, Microsoft?s biggest play is likely to be with a business audience.

Amazon is expected to introduce several new tablets for the holiday season. However, the company may have a hard time repeating last year?s surprise strong showing, when the company was in the right place at the right time with a low-priced tablet that has a strong content ecosystem.

?I don?t see the repeat opportunity for the Kindle Fire this year,? Mr. Orr said. ?I don?t think that brand loyalty as been established.?

Part of the problem is that many consumers were reportedly disappointed with the Kindle Fire experience.

Mini iPad
The upshot is that Apple looks like it will be the big winner again this holiday season.

So far this year, Apple?s market share in the tablet space is flat but up slightly over last year, per ABI Research, and that trend is expected to continue through the fourth quarter.

What might give Apple?s tablet sales a boost this holiday season is if the company comes out with a smaller, less expensive iPad, which many expect it to do.

While the rumors of a mini iPad have been rampant, not everyone believes releasing such a product would be a smart move for Apple.

?I think that that product from Apple would have a negative impact for the company,? Mr. Orr said.
?Some who are saving up for an iPad will see that they can get a smaller one and pay less for it,? he said.

?The question is how much of their potential buying audience would switch to a smaller version and how much of their competitors? business would switch to a smaller iPad ? right now, it is anyone?s guess.?
If consumers do gravitate toward the smaller iPad, this will mean that Apple will see a smaller profit in tablets, which is why Mr. Orr thinks it unlikely Apple will take such a move.

?If Apple?s share of tablet business is growing year over year despite increased competition and they are not having a problem selling products at $499 to $829, why would they do it? It?s not logical,? Mr. Orr said.

?If Apple goes ahead with it, they are conceding that there is a competitive market threat to their iPad line from the Android tablets, which represent 30 percent of the market but has been gaining,? he said.

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York