Apple a victim of its own success?

US computing giant Apple has created such a buzz around its iPad 2 tablet that it cannot keep up with demand, and retailers are battling to source stock through the official local channel.

The tablet market, spurred mostly by the iPad, is set to overtake desktop sales by 2015 at the latest, with some forecasts predicting the shift in computing by 2013. The device has been lauded as a revolutionary, cool tool that will change the way people compute forever.

Apple, the world's most valuable technology company, launched the iPad 2, its successor to the first-generation device, in SA in April, a few weeks after its international debut.

The iPad 2, which hit stores in the US and Canada in March, sold between 400 000 and 600 000 units in the first weekend alone. Since then, Apple has sold almost 14 million iPads in total.

In the third quarter of the year, to 25 June, Apple sold 9.25 million tablets around the world, a whopping 183% year-on-year increase and almost double the 4.69 million tablets sold in the second quarter to 26 March, when the units were only available in North America.

iPad sales have outstripped Mac figures and now account for half of its iPhone sales. In the third quarter, Apple sold 3.76 million Macs, and 18.65 million iPhones.

CFO Peter Oppenheimer has been quoted as saying: “We sold every iPad we could make.” COO Tim Cook said: “Sales of the iPad 2 have absolutely been a frenzy.”

Towards the end of last month, local distributor Core Group said Apple was experiencing a global shortage of iPads and it was working on sorting out the problem. Core was not available to comment this morning.

Retailers say the tablets are flying out of the doors as soon as they hit the shelves, and some are importing the products themselves at inflated prices to counter the situation.

Brian Leroni, Massmart's group corporate affairs executive, says demand is outstripping supply at its Dion Wired outlets, and consumers are placing orders and waiting for stock. Dion Wired, which has 13 stores across SA, is out of stock and is waiting for a shipment, he adds.

Leroni says iPads are selling out in two to three days and “fly out stores”. He says the problem is especially acute with 3G iPads.

The Notebook Company has managed to secure stock, but not through the Core Group. MD Christopher Riley says the outlet is sourcing iPads from independent distributors in the US, UK and the East, which means its prices are higher than the recommended retail level.

“We are trying our best to keep our levels of iPad 2 with 3G at the right level - and to ensure that we have stock,” says Riley.

Riley is determined to have stock on hand, even if it “cuts into our pockets”. Demand is high, as the retailer is selling 30 iPads for every one Android tablet, he adds.

The iPad is popular because of its cool factor, and because it changes the way people are doing business, comments Riley. It is also less cumbersome than a laptop and has a longer battery life.

Steven Ambrose, MD of WWW Strategy, says an out-of-stock situation would be harmful to other brands, which would lead to lost sales. However, “the rules don't really seem to apply to Apple... The danger is, it's creating huge expectations that they can keep it [innovating] up,” he adds.

Ambrose says “there seems to be no downside” to the out-of-stock situation and the lack of devices “seems to fuel the fires of demand rather than kill them. They've hardly put a foot wrong. They've created such brand equity that people are happy to wait.

“The success of the iPad has outstripped even Apple's most optimistic projections,” notes Ambrose. Although tablets herald a new paradigm in computing, “there is nothing else even vaguely as cool”.

Apple's cool factor has aided it in capturing the tablet market as the company does not have any “real” competition, even though other manufacturers have launched similar devices, such as Samsung's Galaxy and BlackBerry's PlayBook.

People want easier and simpler ways of doing things, which is what the iPad offers, says Ambrose. Its long battery life and ease of use for browsing purposes have aided its success, he adds.

Ambrose says Apple has created such hype around its products that people have huge expectations of the company. One huge misstep and Apple would be blown out of the water, which would make it a victim of its own success.

According to IDC, tablets currently account for about 4% of notebook sales, but will overtake netbooks in total sales this year. Netbooks currently make up about 6% of the 1.2 million notebooks sold in SA.

Hannes Fourie, IDC senior analyst for systems and infrastructure solutions, says tablet sales are growing at a rate of knots, although they are coming off a small base. He believes sales will be driven by consumers and the younger workforce wanting them at work.

In addition, corporate demand, such as 1time using the iPad on board airplanes and Gijima's recent announcement it will give the devices to staff, is fuelling demand, says Fourie.

Apple cannot keep up with demand, notes Fourie, and will have to start planning regional distribution to make sure mature markets have access to the stock. “It's a good problem to have.”