September 09, 2011, 5:04 PM — As vendors fight an almighty war with Apple to find relevance in the massive tablet market, there is strong debate as to whether the channel is missing out on a lucrative business opportunity.
The tablet market has never seen so much volatility.
Since Apple sparked the tablet frenzy with the iPad in 2010, a number of vendors have released their own tablets typically running on the open standards Google Android OS.
Indeed, Android has steadily nabbed market share in the lucrative tablet space but the operating system does limit the way vendors can compete with Apple.
Telsyte research director, Foad Fadaghi, calls it the Android Squeeze.
Tablet vendors that use Android OS have to share revenues with partners, can't make money from selling applications and therefore can't afford to lower the prices of their products.
Meanwhile, Apple, with a closed platform and draconian distribution, doesn't have all those hurdles to deal with. With an efficient supply chain, if Apple really wanted to undercut the competition in price, it can afford to, according to Fadaghi.
Despite the tablet market growing rapidly, Apple still has majority market share in that space even though the iPad still carries a hefty pricetag.
"Android needs to be cheaper than Apple in order to sell," Fadaghi said. "Take smartphones for example: It wasn't until prices for Android handsets came down significantly that the platform really took off."
But the Android Squeeze compounded by patent litigations, which is becoming increasingly prevalent, it is hard for Apple competitors to make a decent margin let alone lower the price of their tablets.
While the vendors are battling it out in the tablet minefield, the channel seems to have been sidelined.
The favoured distribution model for tablets is to go direct while bundling devices with a telco service. Vendors have partnerships with telco providers, usually selling tablets with bespoke data plans through retail shopfronts.
This essentially cuts out the 'middle man'; the IT channel players. This is not only happening with tablets but other products such as PCs and smartphones.
"Apple has a preference to go through its own stores and this is creating a 'follow the leader' scenario," Fadaghi said.
"Microsoft already has a direct store in the US, Google might even come out with one and even BlackBerry has kiosks set up in the UK.
"The direct model seems to be taking over a little bit and it's creating a threat for resellers."