If you haven’t heard, the Hewlett-Packard Touchpad has become the #2 tablet computer on the market, right behind Apple’s iPad. That’s an enviable position for any new product, let alone for one that is already at end-of-life as HP has announced a change in business direction, pulling out of the home consumer market, including the 8-week-old tablet. How did it pull off this amazing feat? By drastically cutting prices to $99 for a 16GB and $149 for a 32GB, and taking a bath, losing approximately $200 per tablet.
But this has proven that to consumers, price matters more than performance. Demand has been so high that flash-mobs of shoppers from bargain website SlickDeals crashed several sites stocking Touchpads, including Tiger Direct. Additionally, Best Buys getting Touchpads have been met with lines of customers forming hours before opening, rivaling Black Friday.
While many of these customers are lined up to get for themselves the latest gadget, a tablet PC that rivals Apple’s iPad in hardware, many of the others stalking the discount web sites and standing in line are resellers, looking not to save a buck but to make one, selling the discounted tablet PC for higher prices. In line at a Best Buy in Forsyth, IL last Saturday I spoke to one man who had driven over 3 hours from Chicago in order to get some of the tablets to sell at his electronics store.
Even those who don’t own electronics shops are getting in on the profiteering. eBay is flooded with Touchpad sales, as is Amazon.com with “Amazon Affiliate sellers”, including shop owners and private individuals, but through these secondary markets the prices hover around the $225 mark with the $99-priced 16GB models sell on eBay for an average price of $230, whereas the $149-priced 32GB models sell for an average of $235, leaving far less profit to the sellers.
Even larger retailers are engaging in this activity. Aaron’s, Inc., a national rent-to-own business, is receiving shipments of 16GB Touchpads, but rather than pricing them at $99, their price is $180 including an aftermarket case. Additionally, Aaron’s is making special exceptions to their company policies for the Touchpad – exceptions not to the customers’ favor. Aaron’s offers a 20% discount to customers who pay cash or credit card up front for their items, versus the rent-to-own methods, however that 20% discount does not apply to the Touchpad. When asked about this policy Aaron’s district manager Kevin Miller replied “It does not apply to this item because we’re the only place you can get it.” Aaron’s price-match guarantee states on the web site they will match any local competitor’s print ad or internet price or Aaron’s will give you $100 in cash, however Miller said that only applies to items that are in stock at local stores. Additionally, Aaron’s bundles the Touchpad with an aftermarket case, thus creating a unique bundle that cannot be price-matched.
HP’s policy is that retailers are free to set their own price on Touchpad devices.
But even at the higher price consumers are buying the Touchpads in droves, many seeing the $230 price as a savings of $270 rather than a markup of $130 over HP’s new suggested retail price. For those looking to enter the tablet computing market the $230 price seems very reasonable for a device that allows web-surfing, movie playback, eBook reading, and more. And this may be a signal to future tablet manufacturers looking to take a bite out of Apple, that when it comes to tablet computing price, not features, determines the market. With Amazon on the cusp of announcing a new tablet computer running Google’s Android operating system, they should take a lesson not from HP’s fire sale, but from eBay’s setting of the market price.
As for HP, they announced yesterday that they are “going back into production” for one last run of Touchpads (a claim that many at SlickDeals are calling “misleading” as HP’s initial announcement clearly stated manufacturing would stop in the fourth quarter, not immediately). While these newly produced Touchpads are sure to be highly sought after by customers and profiteers alike, HP is also poised to profit from these new sales. Even at a loss on the hardware, HP’s new customer base promise a profitibue revenue stream through their webOS-based App Store where HP keeps 30% of all sales.
If you are looking for a Touchpad at HP’s suggested retail price of $99, follow HP rep Bryna on Twitter for updates on manufacturing and availability.