Originally Posted by TheOtherGeoff
The iPad ecosystem, which includes AppleCare, AppStore, iTunes, iBooks, NewsStand, all the rest of these directly compete with the other shelves in Best Buy, including their Warranty, SW sales, Music Sales, Movie Sales, Monitor Sales, etc, etc etc.
In short, iPads don't feed the rest of the store, like PCs do, or even TVs do.
There are very low margins on PCs/TVs, but the fact that you buy the software, the printer, as well as buy the music (CDs), Movies (DVDs), accessories, powerstrips, et al. iPads do not drive that level of 'upsell' purchase.
Heck, I'm thinking the biggest ticket items you buy for an iPad would be an AppleTV and/or a smart cover. Both of which are likely having Apple controlling the same margins as the iPad. In short, you're not making it up on Margin.
But I agree, BestBuy is competing poorly online, and on their own brands, which drive profits now. I worked for BestBuy.com at one point, and it's was argued at the time, as a 'loss leader' or a 'very expensive ad site' for driving price comparisons against amazon. The issue is Amazon is a 'buy anything site, and with free shipping, and it's competitive pricing with it's virtual storefronts, Best Buy is trying to subsidize the big-box stores to no avail.
This has nothing directly to do with Apple. It's like the excuse for poor PC sales is being given as the floods in Thailand. That's also a lot of hooey.
Upsell is a term with little meaning. So you sell a very low margin computer, and often GIVE away a cheap printer. Other times, you sell a printer with even lower margins than that low margin computer. So what has the store gained?
It's true that Apple's products have lower store margins. But, they always sell for list, or very close to it. A $499 iPad sells for $499, or at best, $479. But a competing tablet that lists for $499, few of that them that exist, will usually sell for $429, or $399, or even for as little as $379. And that's when it's not being discounted under manufacturers cost for the purpose of getting them out of inventory altogether. If they don't heavily discount, then the product fails to sell at all.
So we can look to the Android Asus Transformer Prime. This is the most highly touted Android tablet out there, and with all the gushing praise we read on the web, one would think Asus has a winner on their hands. But no, they don't.
So there's that pesky lawsuit that Hasbro brought against them for the name. Forget that. What's important about the suit is that in these cases, in order to show damage, the companies must show sales, and possible sales.
So let's say that BB is not happy about Apple"s margins, which makes no sense, but let's pretend. They look at this wonder tablet of Asus, and think that they'll sell a lot of them with those higher margins. But wait! The lawsuit has shown just how popular that high margin product is. So, in order to insure that as many people as possible would get a Prime, like Apple, Asus held a preorder period. So how did it do? According to the lawsuit's revealing of the numbers, they presold a whole 2,000 tablets. Yup, not a typo, that's 2,000. And in addition, for the quarter, their WORLDWIDE shipments to retailers was a whole 80,000. Again, not a typo. That's 80,000.
So BB did get these. They got about an average of 2 per store. WOW! They're sure gonna make a lot of money on that! They have so few, that they should sell out. That will then be worthy of a headline: Best Buy Sells Out of Popular New Android Tablet. Supply can't meet demand.
Better they stick with Apple.