Monday, November 18, 2013

Why Apple losing market share actually does matter

I've seen a lot of discussion about recent market share reports for mobile. These reports indicate that Apple is losing market share to Android. The most recent reports indicate that Android took 81% of the quarter (though that was in the quarter right before a new iPhone, so that isn't entirely indicative). 

In response to this, a number of journalists have been arguing that it isn't a big deal that Apple has lost market share. The argument is that Android is mostly taking the "middle market" (that is, the cheaper phones) and Apple has the lead in the high-end market. It would be like saying that BMW should be concerned that more people are buying Kias and Saturns. BMW has never marketed itself to people who buy Kias and Saturns, so why should they care? More people are buying cars, yes, and no, they aren't buying BMWs. But that's fine. Not everyone needs a BMW, and there's plenty of the market for everyone to share.

Sure, that's fine to say, but it's ignoring a key point: with cars there is no ecosystem (other than the LITERAL ecosystem, I suppose, but then I digress...). There are no major ancillary businesses or services around cars that impact which brand I buy (with the possible exception of repair costs). The point is that my car can run no matter which brand I buy. This isn't true of PCs and Mobile devices, which require applications to run. Apps are OS-specific, and if a particular OS isn't as popular, it will impact sales.

Let's say there was an Apple iCar. The car would, no doubt, be beautiful. It would be intelligent and fun, would do things you never thought of doing in a car, would be fast and smooth to operate... and would be really expensive. Still, it would sell like hotcakes. Everywhere you looked, someone would be rolling past in an iCar. Of course, being Apple, the iCar would run off of iGas, and you'd see iGas Stations all over the place.

Apple Car, iMove, Futuristic Car, Electric vehicle
Someone actually came up with an Apple concept car called iMove. Are you suprised? Details:
Now, let's imagine that after a few years, Apple started selling less of the overall car market because buyers were opting for cheaper models from Saturn and Kia. Market position in and of itself wouldn't be a concern, as long as sales remain steady. You can target different portions of the market and do well. Apple is doing extremely well in the highest end of the smartphone market, after all. However, these cheaper cars, like every other car in the world, run off of unleaded gasoline, not iGas. If less people buy iCars, then less businessmen will want to open iGas Stations. 

Let's modify the illustration and look at electric cars. eCars have trouble getting started because electric "pumps" haven't really caught on. But that's partially because eCars haven't sold very well. Less eCars, less pumps, and thus less eCars. However, in this case, it would be as if eCars came out first, and there were electric pumps everywhere, but then the number of eCars sold was going down, and more and more stations were selling gas and electric simultaneously. 

While not guaranteed, it is entirely possible in that scenario that a portion of those stations would eventually stop supporting the electric pumps, as it would cost them money to have them. This would, in turn, start lowering the number of eCars sold. You probably wouldn't see a total lowering to 0 unless a truly superior product came on the market, but you would see it lose a good portion of market share.