Competition is notoriously fierce in the U.S. retail channel, especially in the cut-throat market for mobile computing devices such as notebook and detachable tablet PCs. No fewer than 13 brands--a full baker’s dozen--sparred over the crowded shelves of big-box retailers in the ever-important Q3 calendar season, otherwise known as “Back To School.” Only a handful of those brands earned gap intelligence’s top “gapScore” rankings for the quarter. The gapScore ranking measures retail execution by indexing several factors, including retail SKU distribution, weekly advertising, and in-store promotional activity. The higher the score, the higher the likelihood that brands convert consumer demand into completed sales.
The results of our ongoing study highlight not only the top brands, but also the Top Movers (and Losers) comparing the same activity during the year-ago quarter, Q3 2017. In order to help better understand the inner dynamics of these markets and the stories woven within them, I interviewed our top mobile computing analysts, Dustin Downs and Jason Barry, to get their insights and to help “Explain The Why” behind the results.
Interview With gap intelligence’s Mobile Computing Analysts, Dustin Downs & Jason Barry:
HP increased advertising and distribution year-over-year at both Best Buy and Walmart. What drove the increases?
@: HP was able to capture share from Dell at Walmart in Q3 2018, expanding its already dominating share at the retailer. HP’s placement score at Best Buy reamined on top, but actually dipped slightly YoY, with HP putting even more focus on its premium Spectre line and slightly less than budget and mid-range. HP launched the first Chrome OS detachable tablet, the Chromebook x2, just before the beginning of Q3 2018. HP hasn’t shied away from taking risks with its product assortment, expanding the Chrome OS line to a new form factor with a premium price point ($649).
Was the change indicative of any difference in HP’s strategy / execution? Any tie-in to HP’s financial performance in PCs (their fiscal Q3 / Q4)?
@: HP has always stretched across price bands and segments within PCs, but has recently put even more focus on its premium notebook lines, in step with most major PC vendors. HP has previously reported the success of its focus on premium, but recent financials did not specifically mention this.
Why do you think Apple trimmed its assortment at BB, WM & Target? What’s your take on the context / background of this shift by Apple?
@: Q3 2017 coincided with the launch of Apple’s new 2017 MacBooks at Best Buy, which were sold concurrently on shelf aside the previous generation during part of the quarter, accounting for a smaller shelf presence compared to Q3 2018. The reduction in tablet placements at Walmart and Target reflects the overall industry consolidation of tablets, seen by both Apple and Samsung at major retailers. Apple also had high Q3 2017 comparables due to the July refresh of the iPad Pro lineup, which were not updated again until November of 2018.
Lenovo advertised heavily at Best Buy, and was among top 3 at Costco, but its gapScore went DOWN by almost 7 points. Why do you think a top 3 brand eased up on the throttle during the all-important Q3 back-to-school buying season?
@: Lenovo lost placements across Cotsco, Sam’s Club, and Staples in Q3 2018 YoY, also leading to a lack of ads/promos at these merchants. Anecdotally, it appears Lenovo is focusing more on important retailers like Best Buy, pouring more money into advertising at the top merchant, rather than supporting placements at low-volume stores like Sam’s Club and Staples.
Dell’s gapScore dropped almost exactly in-step with Lenovo (-7) despite a strong presence at three major retailers (Best Buy, Costco, Office Depot). How does Dell’s market execution strategy compare with Lenovo, and which do you think is better positioned in the current market? And how significant is Alienware (+15) to Dell’s overall strategy?
@: Dell is similar to HP in that it typically stretches its portfolio across price bands, and has also had increased focus on gaming and premium notebooks. Lenovo’s strategy is a little more elusive, they have a strong premium line (Yoga), but still push out a lot of entry-level burst SKUs during the BTS and holidays. We think Dell has a better approach to casual gaming with its budget G series models, while Lenovo is still going for more enthusiasts-type customers, which may hinder its Legion placement at Costco (a place where more casual gamers likely shop than enthusiasts)
@: We mentioned that Dell would be third with Alienware included, but we actually think Dell is doing it right with their two prong approach to gaming: Premium Alienware gaming notebooks for enthusiasts and more entry-level Dell G series models for casual gamers that want a normal looking notebook for more than just gaming alone. This is a similar strategy from HP with its Omen and Pavilion Gaming lines, and Acer, with its Predator and Nitro 5 lines.
Acer earned “most improved” in Q3. How much of a “dark horse” would you consider Acer in the mobile PC market today? How much has their position changed in the past few years?
@: At this point last year, it seemed Acer was heading towards being the dark horse, with no much participation in advertising (nearly none) during Q3 2017. However, it seems they are making a bit of a comeback, both in advertising activity as well as placements at Best Buy and the two office supply stores
Given their market activity is Acer a real threat to the other top 6 brands on this list?
@: As of right now, we think they are the biggest threat in terms of Chromebooks. They have a full consumer line (Swift, Spin) that has just no seen much penetration into the retail market. Their premium gaming line Predator has also been absent from national retailers, though their entry-level Nitro 5 line seems to be competing well with similar budget gaming models from Dell and HP.
You assess that market performance of Microsoft’s Surface is ‘not exceptional’. What do you think of their primary reliance on Best Buy as a retail partner? Would they be better or worse off broadening their distribution?
@: The premium price bands of the Surface line would probably not work well at any other retailer, which typically have much lower price ceilings. Best Buy also arguably has the most informed store associates (along with paid Windows experts), that make it easier for customers to justify the purchase of such high-end devices. Microsoft’s recent release of the Surface Go ($399) 2-in-1 device could be an opportunity for the company to expand into new retailers such as Target and the office stores, which already cater to budget-sensitive consumers that prioritize mobility.
What’s the value of Microsoft’s configuration strategy? Is that important to both buyers and sellers?
@: We think it’s part of the company’s mindset (trying to follow Apple), they want to make one or two products that everyone wants, offer multiple configurations, and just worry about out-promoting the competition instead of worrying about innovating and pushing out new generations. We think it’s more important to the buyers than the sellers, though it sometimes appears to be an illusion of choice when youre looking at 5 models all price above $1,000 that are only $100 apart.
Big thanks to Dustin and Jason for indulging me with your thoughtful and insightful answers, especially the week after Black Friday and the official start of the holiday buying season. For further opinion and analysis, we welcome input from our clients and the blogosphere at large.
For more than 15 years, gap intelligence has served manufacturers and sellers by providing world-class services monitoring, reporting, and analyzing the 4Ps: prices, promotions, placements, and products. Email us at email@example.com or call us at 619-574-1100 to learn more.