Sell Cheap Tablets and the People Will Come

Tablets are the must have gadget of the past few years, but people aren't willing to fork over big money to own one.

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Tablets are the must have gadget of the past few years, but people aren't willing to fork over big money to own one. They're basically cheaper, cooler computers, which make them uber-desirable. But they're just not rad enough for people to get over the sticker shock. Most tablets only really get attention once price points have dropped so low a company is losing money on the product -- even though the original price can retail for less than a computer. Take the HP TouchPad for example. It only sold out after HP lopped $200 off of the original price, offering a tablet nobody wanted for $149 dollars. And now, due to the success of its first sale, HP has announced it's going to use the rest of its TouchPad inventory as a promotional tool to sell PCs and laptops, reports AllThingsD's Arik Hesseldahl. And HP isn't the only one dealing with this low-budget tablet trend. Other companies have figured out people will only come in droves for tablets if they can get a deal.

Over the last few months there has been a sort of tablet undercutting war going on. HP had its moment in the sun, selling out all of its TouchPads at the $149 and $99 price, when nobody wanted them at the original $400 range. It only sold less than 10 percent of its inventory before the sale, Hasseldahl reported earlier this year. Now it's trying to get rid of the dregs running a deal that bundles the cheapo TouchPad with an HP--or Compaq--branded notebook or desktop PC. About a month after HP's cheap tablet bonanza, Amazon announced a "budget" tablet: The Kindle Fire. At $199, it would challenge Apple's pricier model. And just the other day BlackBerry announced an unbelievable deal on its very unsuccessful PlayBook, offering a buy two get one free deal.

Both Amazon and HP are losing money on these ventures, but it's working, in a way. HP rode a marketing wave and got people to buy a gadget it could not get off of its hands. Hasseldahl estimates HP will lose $178 per TouchPad, but it's really not that bad, considering the alternative. "HP isn’t exactly crying over the lost money," writes Hasseldahl. "Remember that as part of the hot mess of news it announced on Aug. 18, the company included plans for a $1 billion charge to account for costs related to shutting down the TouchPad and webOS hardware business." Amazon isn't exactly making bank off of its discount product. A recent earnings report revealed that the cheap Fire is hurting Amazon's profits. But this is all in Amazon's plans. The company is banking on making money off of the media tablet owners buy once they've got the device in hand. And it looks like this strategy is working, the Kindle Fire is tracking to outsell the iPad. As long as Amazon's getting people to buy the thing, it doesn't matter and discount seems to be the best way to do that.

This article is from the archive of our partner The Wire.