Best Buy CEO: Tablet Market 'Crashing'

The tablet is one of the fastest-growing products in the tech industry, with over 195 million sold worldwide in 2013 and over 116 million in 2012, according to Gartner.

So how could a product selling at this rate over the last two years, have the head of one of the country’s leading tech retailers saying, ’The tablets boomed and now are crashing.’

That’s what Best Buy CEO, Hubert Joly, said in an interview with Re/code published Wednesday, calling the fast growth in the tablet market a ’phenomenon.’

[Related: That's About The Size Of It: Tablet Market Declines For The First Time]

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’The volume has really gone down in the last several months. The issue has then been that, once you have a tablet of a certain generation, it’s not clear that you have to move on to the next generation,’ Hubert said of the consumer market for tablets. ’I think replacement is the issue. The penetration has gone so fast that it’s reaching an amazing degree and therefore it becomes more of a replacement market, and the level of innovation in the past year has not been as great as it had been in the previous two years. So, there again, the jury’s out in terms of what’s going to happen, because it’s going to depend on what innovation comes to market. But you need a reason to replace.’

To his point, the tablet market declined for the first time in the first quarter of this year, with 56 million tablets sold worldwide compared to 59 million in the year-ago period, according to research firm NPD DisplaySearch.

IDC believes the tablet market is still set for growth this year, albeit at a slower pace than previous years. The research firm reported 49.3 million tablets sold worldwide in the second quarter, up 11 percent from the year-ago period.

Apple and Samsung, the top two tablet vendors based on market share, both saw their sale numbers take a hit in the second quarter.

Samsung described its tablet sales as ’sluggish’ in its second -quarter earnings estimates posted earlier this month, stating that an increase in demands for phablet phones has taken away from the smaller-screen tablet market. The Korean conglomerate also said Chinese venders, such as Lenovo, have put a dent in its sales numbers.

Samsung's market share dipped from 18.8 percent to 17.2 percent in the second quarter, when it sold 8.4 million tablets, according to IDC.

Apple's market share fell from 33 percent to 26.9 percent in the second quarter, when it sold 13.3 million tablets.

This is the first time Apple has lost market share in sequential quarters since the launch of the iPad in 2010, according to IDC.

Next: Partners Take On Tablet Market

’I don’t think the market is crashing,’ said Raul De Arriz, national government sales manager for Waitsfield, Vt.-based Apple specialist Small Dog Electronics. ’The things about tablets is that they’re not replaceable, like phones, where you get a new one every one to two years. They might have more of a lifetime like computers. From the retail perspective, the tablet is diminishing as it becomes a more mature market, particularly in our market, in the US. Where the tablet is seeing the most growth is in businesses, and businesses don’t get their tablets at Best Buy.’

iPad sales could get a major boost toward the end of this year, De Arriz said, as Apple approaches a refresh in its product cycle and also factoring in its partnership with IBM, allowing both companies to penetrate the mobile business space.

Apple CEO, Tim Cook, revealed during the company's earnings call last week that slumping iPad sales played a role in his decision to partner with IBM.

’We think there is a substantial upside in business, and this was one of the thinking[s] behind the partnership with IBM that we announced last week," Cook said during a call with analysts. ’We think that the core thing that unleashes this is a better go-to-market, which IBM clearly brings to the table, but even more importantly, apps that are written with mobile first in mind."

Solution providers who deal mainly with the enterprise say there may be a decline in the consumer market, but tablet sales in the enterprise are still growing.

’We’re definitely not seeing a decrease in the tablet market,’ said Rick Jordan, director of mobility sales at Tenet Computer Group, a Toronto-based solution provider and Lenovo, BlackBerry, Microsoft and HP partner. ’If it’s slowing down in retail, that’s one thing. We sell in business, enterprise and healthcare is a big market for us. Tablets spell a lot of business case needs. With the adaption of NFC coming in tablets, and we developed our GreenRack application that utilizes that, they are doing a lot more with tablets. In corporate environments that is driving a lot of technology.’

Partners foresee more features being added to tablets in the near future, including mobile payments along with Touch ID possibly for iPads. However, it’s business and healthcare that will see the market growth, not your typical Best Buy customer.

’It’s definitely not ’crashing.’ It doesn’t feel to me that [Joly of Best Buy] has the right perspective on it,’ said Michael Oh, CEO of Tech Superpowers, a Boston-based Apple partner. ’Best Buy is just not well positioned to see the benefits of the tablet market hitting the enterprise or home automation. It feels to me there is plenty of room in enterprise, but Best Buy is just not going to see any of that business. He’ll probably say the software market is crashing too, but the market is just going around them.’

PUBLISHED JULY 30, 2014