iPad vs. Android: Retailers Really Want a Competitive Android Tablet...$/transaction

4re Nut · Mar 12, 2012

Interesting article that gives some insight into the $ value of each transaction: http://www.dailyfinance.com/2012/03/12/ipad-vs-android-retailers-really-want-a-competitiv/

Every time Best Buy and Radio Shack sell an Apple (NAS: AAPL) product, their profit margins get a little bit thinner. And there's not a thing they can do about it.

For example: Best Buy purchases the 16 GB iPhone 4S from Apple for about $600 then sells it for $300 to consumers when they sign up for two-year wireless contracts. Then the wireless providers, like AT&T and Verizon, pay Best Buy a $400 commission for signing the subscriber, compensating for the loss and leaving them with a $100 profit.

But $100 isn't very much, especially compared to Android devices. Reuters reports Best Buy pays Motorola $300 for the Droid RAZR and sells it for $200. They still receive the $400 commission from the wireless service, and now their profit is $300 for the sale.

That's a huge difference, especially when you think of the number of devices sold, which is to say, millions.

"Clearly, the profit margins on Apple products are thinner than other products, whether you are talking about an iPod versus another mp3 player, whether you are talking about an iPhone versus Android or BlackBerry handsets," said Anthony Chukumba, an analyst with BB&T Capital Markets in an interview with Reuters.

Stuck between an iPad and a hard place
In fact, the choice between iPad and Android tablets gets worse: Many iPads are wi-fi only, so there's no subsidy to collect from wireless carriers.

It's too bad, because they can't do a thing about it. Without Apple products, they would lose the majority of their foot traffic. Chukumba says "They have to carry Apple products from a sales perspective, a relevance perspective, and a customer traffic generation perspective."...
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iPad vs. Android: Retailers Really Want a Competitive Android Tablet...$/transaction

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