With iPad, Apple masters the art of the pricey upgrade
Bob Ochoa has owned four iPads in less than two years, but now that Apple is set to release the latest model, he’s dying to get his hands on another one.
“I don’t think there’s anything that can stop me from buying it,” said Ochoa, a photographer in Tubac, Ariz., who has passed along older models to his wife or given them to friends. This year, he’s particularly excited by rumors that the new iPad may have high-definition display and faster computer processors.
For years, Apple Inc. has reaped huge profits by enticing consumers to pay hundreds for a new iPhone, only to convince them a year later that it’s time to do it again. Now the company wants to do the same with its much pricier iPad — and analysts say Apple just might pull it off.
Apple, which is expected to announce the latest version of its tablet computer Wednesday, has dominated the tablet market since it launched the first iPad in April 2010, selling more than 55 million of the devices and accounting for close to 70% of the market. Company officials have called it the fastest and most successful product launch in the company’s 35-year history.
But for those who already own a tablet, is it time to shell out another $500 or more? Personal computer users have tended to wait three years or more before upgrading their PCs, and for many consumers their first iPad is still in good condition and works well for email, Internet browsing and gaming. Still, many analysts think Apple is pursuing the right strategy by rolling out a new device less than a year after the previous iPad came out.
“It’s still one of the hottest products out there,” said Rhoda Alexander, a tablet analyst at market research firm IHS iSuppli. As far as whether the iPad’s meteoric growth might start to come back to earth, she said, “we haven’t seen the product that’s going to come out and force it into that kind of trajectory.”
Indeed, the tablet market is expected to nearly double this year, both globally and in the U.S. Around the world, tablet makers will sell 118 million of the devices in 2012, up from about 60 million last year, according to analysts at Gartner Inc.
Most observers believe the new iPad will come loaded with upgraded gadgetry, including a high-definition display, a faster computer processor and the ability to connect to faster fourth-generation cellular networks. Others think Apple will include the Siri intelligent voice-control feature, and perhaps even a glass screen with a tactile element that can simulate the feel of touch typing.
Apple has declined to comment on the new device, but an invitation sent to members of the media last week said: “We have something you really have to see. And Touch.”
Ochoa isn’t the only iPad owner planning to give Apple repeat business. According to a recent consumer survey by Experian-owned shopping site PriceGrabber.com, 42% of current iPad owners plan to upgrade to the new model. The survey focused on the site’s own technology-inclined customers and is not scientific.
Industry analysts say consumers tend to replace their smartphones about every two years. The devices often wear out from constant use, and unlike with tablets, consumers can get handsets more cheaply from their wireless carriers, which attract customers by paying most of the cost of the phones.
Tablets such as the iPad can cost $800 or more — not including a monthly data subscription cost of at least $15 — and because most people still use them in the living room and in bed, the devices stay intact much longer.
Still, consumers are finding plenty of reasons to justify buying a new tablet while the old one still works fine, analysts said. Finding a rationale is extra easy for those who use the devices at work or who have a family member who might want a hand-me-down tablet.
“It doesn’t end up in a drawer like it does with a phone,” said Carolina Milanesi, a tablet analyst at Gartner. “It either ends up with your kid or your wife or your husband — or it ends up on EBay.”
Savvy consumers are finding that the devices retain resale value, and that they can collect a few hundred dollars by selling a used device through an online auction site or by trading it in. Electronics retailer Radio Shack says it will offer as much as $385 for a used iPad 2 or $200 for a working first-generation iPad.
Matthew Wolford, a student at West Virginia University, plans to trade in his original iPad and use the cash to buy the new model.
“It’s kind of pricey for college students like me,” he said, but since he uses it so much for class, “it’s worth paying.”
