In its first weekend of general release, the Nexus is sold out at some retailers. Stores such as, GameStop and staples have listed the device as out of stock, and according to Newsday.com, GameStop has gone through its two allocations of the tablet. Its next shipment isn’t due until August. Was Google’s forecasting of expected sales off or was this just an unexpected peak in sales due to its introduction?
All the popularity may be due to its affordability and favorable reviews from tech reviewers. Prices start from $199 for a 8GB version to $299 for its 16GB version. Where other tablets have failed, the Nexus might just be the first to give Apple’s Ipad competition. But, one of their problems is that they are reportedly making a very narrow profit on each of their tablets. The profit margin on each tablet is just over $30 per tablet. If Google continues to sell their Nexus with such a low profit margin, will they still come out on top and continue to be profitable? Or will they be forced to discontinue the tablet after the buzz of its introduction has worn out?
1) It’s unclear whether the shortage was a forecasting issue (error? conservative to hedge against a flop?) or related to a branding decision (exclusivity factor). It’s hard to think that Google made a forecasting mistake since they have more consumer information that any other entity in the history of the world. Then again, who knows?
2) If they sell them for ~$300 and makes $30 on each one, then they’re enjoying a 10% spread. That’s pretty good if it’s a bottom line number.
Google is going with a smart approach they are think more about what is affordable for the consumers. even though they have a low profit margin they are sold out so they are going to have more customers that cannot afford the $500-$800 iPad that does the same things but at an affordable price for all.
I think that a forecasting error is not one of the reasons for the shortage of the Nexus. There might be many other reasons why the shortage occurred, but I do not think that Google could make that type of mistake, because of the resources that they have. Google is smart with most of everything that they do, and they would not have released the product unless they would have known that it will do well out in the marketplace, allowing them to still make some type of profit. While the 30 $ profit per tablet might not seem like a lot, I am sure Google has a strategic plan, which will make them profitable while still staying affordably priced for the consumer.
First I think they did not have the production capacity to meet demand and secondly I would assume their profit margin is even lower than $30. That pricing if for market penetration and Google would make that up simply in the volume they sell.