Discussion on:

The one big reason why iPad rivals can't compete on price

What do you think about the pricing of the Motorola Xoom and other forthcoming iPad competitors?

Link to original post:
http://www.techrepublic.com/blog/hiner/the-one-big-reason-why-ipad-rivals-cant-compete-on-price/7724

It's not just one thing. The reasons Apple is successful:

- They're in the market for good. If Apple stops selling slick computers and gadgets, there will be no Apple. They're not going to reinvent themselves as a home appliance manufacturer in 12 months. They've been doing this since the 70s. That means people trust the brand.

- Samsung, LG, Motorola... you've seen their names on everything from phones to walkie-talkies, to refrigerators. If they're the cheapest tablet that fits your needs, you may consider it. But it won't be loyalty. Apple has that.

- The hardware is consistently good. The HDD in my old iPod is dying, as all the ultra portable hard drives I've owned have done after half a decade. Other than that, every Apple product I've owned still works quite well, with superficial wear, but no broken hinges or worn out buttons.

- The software is amazingly good. I have devices by Other brands that STILL don't meet their promises because the firmware never caught up to marketing. Apple's stuff is written with determined goals, and those goals are consistently met. It may not do everything you want (especially at first), but what it does, it does well. It's well thought-out, it's simple, and it's solid. It just works. However, that stability is partly because of their closed ecosystem. It's a trade-off.

- Design. The iPod, the iPad, the Macbooks.. the Power Mac... all designed well. They look nice, the parts that are meant to be dealt with are incredibly well engineered. (Look at the inside of a Power Mac sometime. Or the X-Serve. It's a dream.)

Base model price is reasonable. But they don't JUST sell base models. There's room for more, and people with the means have bitten on this concept.

There is no equivalent in the PC space. The tablet space has the opportunity, but is still trying to "catch up". They lack the vision that Apple has, and the substance, and the staying power, and the App Store.

And after all, the labor, and the bricks and mortar of the Apple Store isn't free. That's not ALL profit, just because the parent company is selling the device to its own offspring around the nation. The overhead doesn't magically disappear there.

Enjoy your work, nwallette. Succinct, clear and well presented.
Namaste,
mhikl

I'm not the least ashamed to say that I've been an Apple product user since the late 1980's. The reason? Certainly not a better price. And no, the Mac wasn't the first personal computing platform I used (so it's not blind loyalty). Drinking some kind of Apple Kool-Aid? Wrong again.

It's all about experience. Are their products perfect? Of course not. But for my money, they are consistently better engineered than their competition. I like to say that there's a *reason* a Mercedes cost more than a Yugo. No one even comes close to their overall user experience. And that's why I stick with them, entirely willing to pay a modest premium for their products.

-Dw

Apple also gets a cut of every application that's sold via iTunes. Other tablet manufacturers don't have this source of post-purchase income. It's easy to accept minimal profits (or even none?) when you know you'll make it up and more on the back end. Razors can be sold at a loss; the ongoing sale of replacement blades is where the money is.

I was gonna give the same example & use printers ( I-POD) with replacement cartridges ( AP STORE) & Accessories as the profit medium.

If you look at Apple's financial statements to Wall Street, the company makes A LOT more money off of device sales (including iPad) than app sales.

However, over time, I think the software and services will become a much more valuable part of the game for Apple because competition will drive the cost of devices down. So your razor blade scheme will eventually come into play. It's just not the driving factor yet.

I wonder it it's still in the lower 40% range.

http://www.pcworld.com/article/188196/apples_ipad_profit_breaking_it_down.html

a h/w vs s/w breakdown limited strictly to the iDevice environment, excluding desktops, laptops, and servers. I suspect the s/w is a much greater percentage of total income for the tablets, phones, and music players than it is for the more traditional computing systems that aren't restricted to the app store and its iTunes sales interface.

Just a thought.

I don't get it. The 32 GB iPad with 3G costs $729. The 32 GB Xoom with 3G costs $799. Look at all you get for that extra $70: two cameras, SD card expansion (easily worth the small premium all by itself), HDMI/USB ports, ability to play Flash, relative freedom of the Android platform. Now maybe the iPad 2 will have all that at the same price and then you'll have a valid comparison, but the comparison with the current iPad, making it sound as if it's way less expensive, is just silly.

The fact is that the 32GB 3G iPad is not one of the most popular models or the one Apple holds up for the world to see, and its $729 price tag is not what people think about when they think about the iPad price. Clearly, part of this is psychology. But, part of it is also economics.

The traditional tech vendors seem to have decided that the way to beat the iPad is to toss in more and bigger specs -- most of which the average tablet user won't notice and doesn't care about. As a result, most of these iPad competitors simply can't be sold for less than $500, which means most of the market will tune them out (no matter how cool the specs are). I still see the ideal price of tablets settling into the $300-$500 range.

Also, as you alluded to, we're comparing the Xoom specs to an iPad that is a full year older. A fairer tech-to-tech comparison will be the Xoom vs. iPad 2. I predict the Xoom will still have better specs and the iPad will still be cheaper and the iPad will outsell it by a ratio of at least 10-to-1.

I bought a Craig Wifi Touch Screen tablet that runs Android at a local drug store for $100. I had to exchange the first one as it wouldn't connect to the network. The second did. Worked for less than 24 hours and then it had a fatal irrecoverable crash popup that would not go away even after shutting the thing off and on and restarting. There is no user-serviceable battery to remove either. I took it back and got a refund. Later, finally a tech support person got back to me about the tablet and said to exchange it because they are known to have problems with the electronics in the tablets in some units. So I think if it's too cheap for a tablet, better be wary of it's ability to work. Find out if you can recover from a fatal crash first before even buying one. Or else you'll have a very expensive piece of toast.

I just about choked when, on the road for vacation, I had to spend $20 on a cord to connect our daughter's Nano to a PC. Yes, they're available more cheaply - if you have time to wait for one to be delivered, etc. But the very fact they're able to charge it (and that it gets bought) is telling ... I don't care HOW white it is, it's a frickin' cord. I strongly suspect that part of the equation is the profit margin that Apple is able to rely on for ancillary products.

Xoom and others, using bog-standard cords etc. ... won't have as much ancillary profit to rely on.

Archos, etc. - the vendors in the $150 - $300 range, who WILL sell direct - are going to be interesting to watch. Heck, I'm hoping B&N smartens up and cashes in on the color Nook being such a good Android tablet - why not charge $30 extra and really support it as a tablet device.

Archos is an interesting case. Sure, they're small. But while the article mentioned Apple's real advantage in retail, it missed the most profound part of that: distribution channels. Apple sells computers, phones, and PMPs, and often though in-store boutiques. So they can push any kind of new device, and several models, depending on the outlet. These articles are usually only looking at the large vendors: Samsung, Motorola, RIM.... all of whom only have a retail presence in cellular (ok, Samsung's selling TVs, too, but not computers). And thus they introduce the pricey models first, since that's their existing retail channel.

Archos has an existing retail channel for their PMPs.. they've had it since before Apple introduced the first iPod. They're also in the curious position of selling Android tablets as just their next generation PMP -- they're not chasing the iPad. And thus, even though they're a tiny company by comparison to Apple, Motorola, or Samsung, they sell cheap. You can buy a 7" Archos for under $200, a 10" version for under $300, same performance as an iPad.

... exactly what is their "existing retail channel"? Where can I buy one, other than online? (Assuming I want one, that is.)

I've seen them in electronics and computer stores for years.

In fact, the front boutique of one of the places I worked for sold a whole line of Archos products back in 2003.

WHERE? I don't care whether they're new or not, where are they? Why haven't I seen them since I've visited CompUSA, Best Buy and all the other technology stores since I was a kid? I'm not young any more, and quite honestly I never heard of them until people started touting the Archos as equivalent to the iPad.
Why?

Couldn't help it - the setup was too good.

Some listed retailers on Archos' website:

Walmart
Circuit City
Newegg
CDW
TigerDirect
Ingram Micro
Amazon


Canada has them at Best Buy and Futureshop, for larger chains.

that wouldn't be available if all Apple products were to be sold "off-the-shelf" and "on-the-floor", like most other manufacturers do when their products are sold at stores such as Best Buy or Office Depot or Wal-Mart.

The fact is that, Apple's products aren't really open to direct comparison when they're being sold at Apple's own stores, and chances are that, when people walk into an Apple store and make a purchase, they'll be walking out with... an Apple product.

Now, when people shop at a store such as Best Buy, most of what they walk out with won't be branded Apple. Yeah, it's true that there will be a bigger variety of brands, and a bigger variety of PCs and tablets and phones, but, even within those stores, the Apple brand is set aside to a different corner of the store where a direct comparison with the others is limited.

Now, why doesn't somebody conduct an experiment where Apple doesn't have the benefits of its own store or it's exclusive corner in a store, where side by side comparisons are permitted on features and prices? I would bet that Apple's sales wouldn't be even close to what they are now.

If I were to go into a store and somebody showed me some tablets with more or less the same features and no real advantages, I would walk out with the less expensive item, as long as the manufacturer was a respected and well-known brand.

Now, if somebody were to also give me a direct comparison in any store between the iPad and another tablet that had more features at about the same price, I would walk out with the brand with more features for the same price. I wouldn't care about colors or about a shinier exterior or about a nicer logo. I would want the "better" specs for the same price or lesser price.

"... but, even within those stores, the Apple brand is set aside to a different corner of the store where a direct comparison with the others is limited."
Every Best Buy I know has the Apple ministore sitting right next to their other computer brands, making direct comparisons very easy. I will note that most customers coming out of a Best Buy also don't carry an Apple box, but if they didn't sell any at all, do you think Apple would keep that ministore going?

Even Walmart (I can't speak for Target or any others) has the iPhone displayed right next to all the other smart phones where prices can be compared. This tends to give the lie to your statement that they are "... set aside to a different corner of the store...".

What you seem to overlook is that Apple has a reputation that somewhat overrides mere price differences, and this, too, affects their sales in these 'partner' stores. When someone wants cheap, they buy cheap; but Apple's reputation for reliability and ease of use tends to attract those who want a little more bang for their buck and compare in the same price ranges.

While it's true that the Apple "ministore" is not set too far from the other brand offerings, why do they insist in setting themselves apart? Why not put their offerings right next to the other brands so that people could do side by side comparisons against the others? I do that with what I find from Toshiba and HP and Lenovo and Asus and Acer and eMachines and Gateway computers. And, I always end up purchasing the reputable brand that offers what I perceive to be the most for the money that I'm willing to spend. So, why can't Apple feel comfortable with allowing the same kind of comparison that the other brands allow? If the quality and value is what matters, why not let the customer decide without Apple having to set themselves apart?

And, that statement about "reliability and ease of use" is a phrase that belongs in the history books and is no longer applicable. Apple products aren't any more reliable than comparable products from other manufacturers, and the ease of use is no longer on the side of Apple like it might have been some years back; not since the other OSes have equaled or surpassed the perceived ease of use of Apple products.

The fact is that, with the upgrade cycle for new computers being somewhere between 4 and 5 years, why should someone pay a lot more for something that isn't that much better than similar products from other manufacturers, and which is likely to be replaced in a short period of time? Most of what goes into Apple computers are components that other manufacturers use too, and with the new OSes, including Windows 7 and Android around, why should people be expected to spend so much more for Apple gadgets than what other manufacturers have to offer? You might want to argue that the iPad is not really that expensive when the others coming out are about the same price or even higher, but, the total iPad experience is considerably higher than from the others when you compare the lock-in that happens with apps and subscription prices.

I'm not arguing that they need to change their prices to match the others, but, when prices are so drastically different and higher, then it's understandable why Apple would want to keep their products in a different corner of the room.

Then, there is the Apple stores, where, if people go in and shop and purchase, they'll invariably be walking out with.... Duh!, an Apple product. No need to shop and compare and make decisions. The decision has already been made. The only decision to be made at an Apple store is, which one of Apple's products is one needing or wanting at the moment, like, an iPad, or an iPhone or a Mac. Not much in selection process other than the "type" of product from "Apple". Now, I see where you also mentioned Wal-Mart where some Apple products are held in the same locked glass enclosures as other brands, but, again, that's not a real good shopping experience where shoppers can play with the different products and make intelligent decisions regarding the different brands. Also, how often have you seen Apple computers at a Wal-Mart?

In the final analysis, I don't fault Apple for doing things their way and which has them being as profitable as they are. But, I have to wonder how profitable they'd be if they played by the same rules as the rest of the tech industry.

* "Why not put their offerings right next to the other brands so that people could do side by side comparisons against the others?"
Side by side comparisons have the problem of focusing on the specs vs price with all else being equal; OS X is not Windows 7 so all else is not equal. Being different in such a visible manner forces the marketing to emphasize that difference, not minimize it. Obviously this works for Apple because Apple continues to see double-digit growth in computer sales while other brands currently are lucky if they're able to break even. HP's latest figures that I'm aware of has their growth a mere 5%, Dell at -5% and only Toshiba showing about 12%, while Apple's latest figures show 20% growth in January alone -- a traditionally very slow growth month for any brand.
* "... Apple products aren't any more reliable than comparable products from other manufacturers, and the ease of use is no longer on the side of Apple like it might have been some years back; not since the other OSes have equaled or surpassed the perceived ease of use of Apple products."
I would argue this on very many points, most of which are the simple fact that Apple still holds the highest Customer Satisfaction ratings on both their products and on their service. Toshiba, one of the most highly-rated brands of Windows PCs has proven itself lacking to several people I know who purposely bought that brand for its reputation as one of the best. In one particular, a Toshiba laptop refuses to read CDs and DVDs on its internal drive, and yet Toshiba's service people continue to claim there's no problem. The same disks that fail in the internal drive work fine for the computer on a 5-year-old external drive. Why?
I might also note that Windows 7, despite the huge leaps forward it has made in usability, still has serious issues in intuitive operation for non-tech-savy users. The control panels in default mode make it nearly impossible for an elderly gentleman I know to find out how to add/remove programs and make simple settings changes for his keyboard, mouse and game controller. Other functions like making a DVD of his home movies are effectively impossible for him, yet were simple enough in XP. Why?
No, while Windows has improved, it has hardly surpassed OS X in usability and as yet no single brand of Windows PC matches Apple's reliability according to their users.
* "with the upgrade cycle for new computers being somewhere between 4 and 5 years, why should someone pay a lot more for something that isn't that much better."
The reality is that the average upgrade cycle for Windows-based computers is between 3 and 4 years, while that for Apple's computers is between 5 and 7 years. True, as Apple's computers age they lose that 'cutting edge' feel, but they run on just as doggedly as they did when new without having to undergo frequent Registry cleanings and general disk maintenance. I won't argue that some people can make similar claims about their Windows PCs, but to demonstrate a 7-year-old G4 Mac Mini as a DVR, a 10-year-old G3 white iBook still able to run Classic applications (like Photoshop 2.5?) and get between 2 and 3 hours of use per charge on its original battery, a 6-year-old aluminum Intel MacBook Pro able to run games like Dragon Age almost as well as a new one and so many other devices that see no special handling of any kind so greatly outlast even custom-built Windows PCs says that the return on investment is much higher for an Apple product than any other brand currently on the market. This doesn't even touch on the resale value of Apple's computers, either.

Apple differentiates itself in so many ways--all aimed at the consumer, not the specialist. Putting itself in with all the other hardware with nothing to emphasize that difference simply commoditizes their products. Yes, those other retail stores very likely will and do sell more of the other brands overall, but with only two exceptions, none of those other brands sells more than Apple alone.

I would re-think the gross margin that Apple gets from Consumer Electronics retailers. A number of years back I was talking to a owner of a large Chain of big box electronics and when he mentioned his average gross margin I had to ask to clarify it for me three times. It was 3%. It may be more but ask yourself when you see competitors advertise price on the same product how much variance there is. Sure MAP has proven itself legal, but that still wouldn't stop them from doing things like "put it in your cart to see the real price" or big box stores telling customers, we can make that lower just don't tell anyone ...wink wink.

I asked the owner how in the h*** he could make money at those margins. Volume plus selling extended warranties , accessories, grey products, off brands, warranty service and repair. It may not be as prevalent now, but the last time I went in to spend what for me was a large sum of money, the salesman almost acted disinterested in what brand or model I picked. I might as well have been on my own. Once I had picked it through then the salesman came alive when it came to selling the extended warranty because he doesn't make a dime off the product , only the extended warranty.

As I sold Music Products to music retailers , some dabbled in consumer electronics and were just horrified at the margins. So my guess is Apple may give dealers a 5% -7% discount. It's just as important for retailers to use them to get people in the store as it is Apple to help spread the word. Apple retail stores are completely different. They probably have to "buy" iPads but the margins are much deeper. The $270.00 gross margin sounds close but only because Apple is willing to commit to massive quantities of parts. Rumor had it on their very first run of iPads they bought 10 Million LCD screens. In consumer electronics, volume is everything at every level.

That's why you don't see mom and pop stores selling consumer electronics and very few stores of that size that selling computers unless they are custom built or white boxes. On the other hand the Music Business still has thousands of mom and pops surviving against a veritable blitzkrieg of Big Box stores, Music Chains, Online sales , catalog sales and even telemarketers to the homes of the customers. They can survive because the margins are more generous, they sell many services like lessons, used instrument consignment sales ( not as much with eBay around), repair and most importantly, musical instruments have what the printer business calls "consumables". A regular customer who comes in for lessons, new guitar strings which can go dead in days, violin strings, mouthpieces for Horns, parts that break off, replacement instruments when they are stolen, drum heads, drum sticks, drum accessories on and on. One intangible is that customers considering a major instrument purchase has to test it by playing it in most cases. How many people will by a $10,000 Martin guitar sight unseen? That gives the dealer at least an opportuntiy to sell the instrument and that's better than the bookstores or other free standing stores that sell product that people don't need to feel or touch to buy. The dealer may make very little as they will discount it by 40% in a second. But once a musician spends that kind of money at a local store smart retailers will give them ongoing red carpet treatment which they won't get from Amazon/Musician's friend.

Big name lines are used for what they their true value is no matter what kind of retailer one is: getting people in the store. Most of them have online stores too. Then it's up to retailer to be a wise merchandiser with competent sales help to make each sale profitable. Probably the best example of this is Sweetwater Music in Fort Wayne Indiana. Operates a single location yet is responsible for a measurable cut of annual retail sales for the entire industry because the owner is a very smart businessman as he has successfully integrated all methods of selling product all the way to very well trained telemarketers. He also invests in his people which one can see by going to the website. It will show a stark difference compared to say a Best Buy.

The iPad may be profitable for a big box if they sell a full line of accessories. In fact they probably don't care if they sell that many iPads as long as it gets the customer in the door to buy related products. The notion that Apple would accept a 5-10% margin to sell to Big Box stores is as ridiculous as a Car company selling their high price luxury cars to their dealers at 5-10% over cost.

The major reason none of these companies can match price is that they are following the trail burned by the deaths of 100s of PC Clone makers. They essentially are retailers for the Chip and the OS maker. They can't and won't order huge quantities of parts and there is the difference. They have to differentiate themselves so the product may have a different shapes and sizes , parts etc. The purchase is treated as an individual purchase by the parts makers where here they can make a serious profit because they are essentially selling the same parts to a few dozen manufacturers who order in lots that may be a fractional percentage point of what Apple orders. The fact that they have to sell through Big Box stores, Online stores and carrier stores is almost meaningless when people are looking for products priced 30-40% under Apple's with twice the features and performance.

Apple doesn't need to get a huge premium on each sale anymore as they have reoccurring revenue from iPads and iPhones at the carrier level , the content level and the Apps level. They also dominate the markets which wasn't the case in computers. According to Apple they don't make much money, if any, selling content. That will change as the dominant means to view or listen to that content become smart gadgets..

Meanwhile, Google has yet to monetize the O/S in any meaningful way, or see much profit flow from their app store ( which will change) the OEM /Retailers will never get the critical mass to have their own content or app stores that will produce a profit that registers on their profit meter.

The carriers like it because they don't have to subsidize the sale of the phone as much as they do with the iPhone or the even the iPad. Initially it was internet knowledge that AT&T didn't start making money on a iPhone until the 17th month of the 24 month contract. Yet it was important for them to get these customers . If their network had actually worked it would have been a good strategy. The fact that four years after release AT&T still has problems is monumentally stupid but not surprising from a company that still operates like it's a monopoly. If Apple could get around the anti-trust people, I can see them either starting a carrier with fresh technology or paying cash for one of the better existing ones that aren't tied down to legacy customers.

Finally, I think most people will be surprised in a few years when enterprise sales dominate the annual unit sales of tablet computers. Consumer sales will still be important but it may be less than 50% of total sales in a much shorter time frame than anyone is predicting right now. There Apple's gross margin may slip if a Fortune 500 company orders 100s of thousands a year. That also may give a Samsung or a Research in Motion the necessary critical mass to to at least match Apple yet with a much smaller gross margin. But they could also underprice Apple (maybe ) in the retail space.

Personally, if Apple does a little ego mod and puts the logo of the company on the iPad and allows the company to name it with nomenclature that delineates it's product and or service as part of the name, with their logo at a good size, plus a designed and manufactured by Apple Computer, they will own that market. They have put two well thought of brand names on one product. If the Fortune 500 company gives the product to its business customers to be on the same page for ordering on-site repairs and maintenance, inventory checks and ordering plus provide all the users the consumer features that people like, it will be seen as a major sales closer. I'm thinking there is major behind the scene push to be the first to capture the largest Fortune 500 companies. Once they get good press from them, corporations of that size tend to move in herds. There are also monster corporations all over the world that would use them too. The opportunity is so mind boggling, I won't even put it on a spreadsheet.

Anyway, revaluate your gross margin commentary. Part of it may be correct but it's my firm belief you couldn't be any further away on other areas.

I have to say that I also thought the margin analysis in the article was sketchy. If Apple could take a hit on pricing and undercut other vendors because they have a direct sales model, why then are their computers and phones more expensive than the competition? By the article's argument, Samsung/Motorola/HTC should be thinking about opening retail stores. I'd be surprised if they were - the reality is that the margins will not be that different when all the other operating costs are factored in.

I think that the underlying reason for the price differential is Apple's large-scale buying power - and I think that once the competition ramps up they will be able to better compete with Apple on tablet pricing. Apple has no reason to undercut rivals - it has built itself up on expensive product lines, which sell at higher prices to equivalent products because of (mainly) better brand value, and controlled supply quantities. It would be an about-turn if they decided to have the cheapest wares on the market - they certainly wouldn't continue to make quarterly profits of $6bn if they did that!

A bit too lengthy so I only scanned quickly but I think you touched on this. I know COSCO is dropping Apple probably because the margin is so low and they sell for a few bucks cheaper. If they are getting 50% off the price for competitive products they don't have to charge the whole price but may offer go for the bulk profits substantially upsetting the apple cart, so to speak.

(Work on concision, man. Short Term Concentration Span (STCS) is the bane of this generation. You write well, otherwise. Namaste.)

I overheard someone in Costco the other day make the same comment that you just made. In my market (WA, the home of Costco), they have only ever sold iPods. When I checked Costco.com a moment ago, there was the iPodTouch for sale. So perhaps Costco is selling them online only -- but that's still selling them.

Its ALL Sansa devices, no Ipods.

Agree with what you say. However, the costs of the Apple stores has to be factored in. Granted, Apple Stores sell more than just iPads so the costs of a store are spread out. However it is weighed, Apple seems to have all the advantages. 1. Being first. 2. Years of research and planning and testing. 3. Quality. 4. Bulk buying. 5. Integration. 6. iTunes. 7. Customer service & support (upgrading OS's longer than other; therefore few, if any, orphaned products. 8. Superior merchandising and advertising. 9. The cool, wow and now factors (not coming soon, but here now). 10. Price. (As explained above.) 11. Ease of use for the majority (not appeasing the geek and tekkie nerds). All of which makes them (like M$ previously) the only real game in town.

I'm sure there are more reasons but the eleven should pretty well explain Apple success.

Just like the IPod was the first MP3 player?
They weren't first, but they were first in a blockbuster and fully marketed way, and did build on Pads and Tablets that have existed for years. The Pads before were seen as niche products and not properly marketed by the manufacturers.

Same with the MP3 players before then.

The Apple Newton was a handheld tablet as was the Palm handhelds. The PalmPilot interface was very Mac like. So yes, the iPad has built on what went before but so did those build on what Apple had designed and influenced before. That's technology, for you.
Rightly, there were MP3 players before iPods but the originators hadn't figured out the finesses and possibilities to present the best product. Apple saw the possibilities and revolutionised their platform catching the others off guard. Apple bought Soundjam and turned it into iTunes, the killer software that integrated iPods and computers so smoothly.
Interestingly, Apple has been working on the iPad way before they introduced the iPhone, which was an early iPad shrunken with added phone ware.
T'will be interesting to see how iPad fairs over the next few years to see if it can keep its lead. I have a steady understanding of the progress of the iPod in mind wondering if the same route will be followed such that the iPad can head the competition off at the pass. The competition may or may not be quick enough to thwart Apple's intentions; but it will be a great ride, either way.

Apples Newton message pad may be the first ?

The Apple Newton MessagePad. Introduced in 1993, it was the first Personal Digital Assistant.
The personal digital assistants manufactured by Palm Computing was in 1996
The Palm was a toy compared to the newton

Why is it people keep comparing the $500 iPad vs. the Xoom? When you compare the actual iPad that "comes close" to the Xoom (only in terms of storage space), it's $729 vs $800.

And in fact, aside from storage, in every other HW aspect the Xoom outdoes the iPad (gen 1). I don't see how that is non-competitive.

What people really want is for manufacturers to severely undercut the iPad, instead of comparing (no pun intended) Apples to Apples.

If Xoom also offered a $500 model, at similar to the low end iPad, there wouldn't be an issue. But Motorola doesn't, and a large portion of the buyers shop on brand/price rather than specs.

As to Xoom outdoing the iPad, yeah, you could say that if you pretend the iPad 2 isn't right around the corner. The iPad 2 vs. the Xoom are the two equivalent products, as neither one is yet shipping.

If Motorola, Samsung, Dell and other big brands want to copy Apple and make huge profit margins on their tablets, that's their choice. Archos is a French company, they've released a whole bunch of Android tablets where the most expensive is the 10.1" sized one at $299. It's capacitive, has a same processor power (1Ghz ARM Cortex-A8 45nm) and RAM (256MB) as in the iPad, while Archos is better in terms of weight being 30% lower, it including major features iPad lacks such as HDMI output, USB host, a Kick-stand, full video codecs support, a Webcam for video-chatting, a MicroSD card storage expansion slot.

If you check my website, you'll see over the past 5 years I've posted tons of videos of over 200 tablets, some are sold as low as $100 made by Chinese companies.

The thing is, Apple is making huge profit margins, but that won't last when cheaper Android devices are going to be more and more available in more and more stores and more and more people like you start to learn about those.

the Archos tablets do not support the standard Android market. This has been my only reason not to purchase one. While the AppsLib market may be good, I am somewhat hesitant to put my full faith into it. There are ways to hack the GMarket onto the Archos, but I shouldn't have to.
If Archos can somehow convince Google to allow the GMarket on its devices, I believe they would be at the forefront in sales.

remains an issue. Android tablets won't be as slick as the iPad, nor offer access to the Market, until Android 3.0... which means Real Soon Now, but not today on most tablets.

While Honeycomb is absolutely awesome for tablets, Froyo is alrewdy better than current ipad hardware.

One of the questions I have with this analysis is the implication that Apple Stores have such low overhead that a 100% markup is a big chunk of profit. Have you been in an Apple Store lately? What is the number of employees per square foot? Now go to BestBuy and calculate the same number. People are expensive -- it's why you see so few of them in stores like BestBuy.

Then there's the overhead back at headquarters needed to manage distribution to the stores. And advertising. And all of the other headaches (read $$$) associated with managing an extensive bricks-and-mortar retail arm.

I'm assuming that your observation about larger profit margins for web sales are accurate. I think the ecosystem that Apple has built up through the iTunes stores is a much bigger factor than profits at the Apple stores. But hey - you could be right. After all, MSFT has jumped into the retail store game. Are they known for padded profit margins on anything other than Windows and Office?