Staples: Tablet prices will fall through year, but inventory risk minimal

Summary:Tablet sales seem to be chugging along at Staples, which noted there are clear winners and losers among Apple's iPad rivals. Price will be king.

Staples executives said Wednesday that tablet pricing "is going to find its way" and that tech vendors are protecting retailers' inventory risk in the event of rapid price cuts.

The comments, which came on the business retailer's second quarter earnings conference call, are notable amid reports that Best Buy is saddled with excess inventory of HP's TouchPad. The TouchPad launch and inventory concerns will be a likely topic when HP reports earnings on Thursday.

In many respects, Staples has a front row seat as tech vendors vie to mount a tablet challenge to Apple's iPad. Staples carries eight tablets for now and the company indicated that sales were solid overall. Customers appear to be buying tablets along with phones and PCs.

Here's what Demos Parneros, president of Staples U.S. stores, said when asked about the company's risk when HP or another vendor lowers prices soon after a product launch:

We are excited about the tablet business, first of all. It is a new business for us. As I said before, it is a complementary business. We really feel like customers are becoming three device users with a laptop, a mobile phone, and of course the tablet . They are used differently. So in terms of the launch, we can't control who is manufacturing the product . Obviously we have an excellent selection in our stores. We have got about eight tablets in the assortment at the moment, some are stronger than others . Clearly, there are winners and losers there. I think the pricing is going to find its way. It really depends on how they are moving the product. The customers are critical here because they have products to compare this to. There is a lot written about this product. We expect it to just get better and I think by holiday, it will be pretty heated up.

Staples CEO Ron Sargent added that there will be an inflection point for demand as Apple's tablet rivals drop prices. "As the technology improves, prices start to come down and customers become more educated on what tablets can do for them," he said. "We expect sales to continue to ramp throughout the year. Attachment rate for accessories are very good. Kindle and Nook electronic readers also continued their strong performance during the quarter."

Sargent also addressed the company's inventory risk.

Typically with the vendors, we are price protected and in many cases, inventory protected, so there is really no risk to us . We manage our inventory pretty well and work with the vendors to -- if they are going to lower the price, they are going to protect our inventory as well.

Parneros added that Staples has to be smart about its inventory choices and assortments.

At some point, the TouchPad inventory flap really comes down to business intelligence and analytics. There were serious miscalculations with demand forecasting for the TouchPad no matter what party---HP or Best Buy---is on the hook for the inventory.

Topics: Tablets, Apple, Hardware, Hewlett-Packard, iPad

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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