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by Stephen Logan on 23rd August 2011
It’s fire sale time! That usually only means one of two things: 1) a company is going out of business or 2) a manufacturer is trying to shift a failed product. In this case it’s the latter, with HP attempting to get rid of its TouchPad.
This is just one such example in a long tradition of stockroom clearances. For instance, back in 2001 Sega couldn’t offload the ill-fated Dreamcast fast enough, dropping prices down to a miserly $50 (from its original $200 asking price). Now Hewlett Packard are doing the same with their now discontinued first foray into the tablet market.
So what’s so interesting about a company flogging off old stock? Well, from an online point of view there is a lot that can be learnt about the trials and tribulations of a fire sale.
Creating Public Awareness
First of all, you need to make sure that people are aware that there’s a bargain to be had. Never has this been easier. If you send out a press release to major blogs within the sector (in this case, Mashable, TechCrunch, Engadget and T3 to name a few) and make sure your potential customers are aware of it.
In the case of the TouchPad, as with so many other limited offers ,the real frenzy began when it hit the social networks. Suddenly it wasn’t just techies (most of whom probably know enough not to buy one) that were aware of the massive savings to be had, it was the whole world. You can buy a fauxPad for £90, down from over £400, you’re going to take a look.
Reputation and Existing Market
So when you’ve got a big promotion and you want to achieve maximum coverage (let’s face it, who doesn’t) a combination of PR and social media can really help to fan the flames of public interest. In days of yore, newspaper announcements and word of mouth were your best tools. In many respects, this is still the same; however the immediacy of reporting and ease of sharing has been made much easier.
HP have an obvious advantage though. Not only are they an established brand with a decent reputation, but the product is perceived as a high end luxury item at a remarkably reasonable price. Thanks to the popularity of the iPad, tablets have seen an explosion in popularity – now the TouchPad appears to have taken this to a whole new level.
Free Pr? Far from it!
Originally I thought this was a clever marketing ploy by the company. After all, how else could you garner so much positive publicity? But the more I read, the more devastating it appears. Writing for All Things D, Arik Hesseldahl suggests that the respective manufacturing cost of the 16GB and 32GB TouchPads are $306.65 and $328.65 respectively. As such, selling these at $99 in the US and £89 in the UK is resulting in considerable losses for the company – estimated to be in the region of $140 million and $300 million.
There are no additional second generation products to promote or even an operating system to maintain as the range is being discontinued. So whilst over a million people will have a HP TouchPad in their possession, it is unlikely to provide the company with much in the way of future revenue – through upgrades etc. This fire sale is simply about getting rid of everything and limiting losses.
Sales Bonanza for Resellers
For resellers, the massive discount must be like an early Christmas present. With consumers clamouring for products, websites are crashing left, right and centre (such as Misco, below). Rumours of £89 TouchPads are directing thousands of visitors to ecommerce sites, with the touchpaper lit by the Dixons Group yesterday, who first announced that that their stores would be discounting them from 6pm.
Unsurprisingly they sold out in double quick time. Now the bandwagon is set in motion, everybody appears to be jumping on board. Although many retailers are still holding off on price cuts, much to the consternation of the baying public. At the time of writing Amazon UK, Tesco, Argos and a whole host of other UK sites have avoided the temptation, although prices do appear to be fluctuating (below you can see the latest price on Amazon compared with that seen two hours previously).
Demand is outstripping supply. This has created urgency and has helped to fuel the desire amongst those who might otherwise be completely nonplussed by the whole thing. The frenzy that has been created is a entirely unique phenomenon and one that can only be made possible by the Internet. This is perfectly illustrated by the following trend graph from Blogpulse, which shows how interest spiked over the last week – even moreso than when the product was launched in fact.
Feeding the Fire Sale
Retailers are using Twitter to get in touch with concerned customers and to inform the rest of the world about when/if they are likely to make TouchPads available. That’s what crashed Misco and has slowed so many others. Of course, this isn’t such great news, particularly as it may start impacting more lucrative sales. But it shows the importance of having the server capacity to deal with major influxes of visitors, particularly for major promotions.
Time and time again ticket websites fold under the pressure of massive sales, leaving fans angry and frustrated. Equally, a number of manufacturers, brands and businesses have fallen foul of being over generous with their offerings, leaving themselves out of pocket – whether through promotions that go viral (think of Hoover all those years ago) or offering vouchers that prove more popular and costly than expected.
So if you’ve gone out and secured a cut price HP TouchPad, you can count yourself lucky. Okay, so the operating system is almost redundant, parts may be difficult to procure and support might be a challenge, but it’s still a decent enough piece of kit (so I am led to believe). The fire sale though has provided another fascinating insight into the reaction of the online community as well as the dynamic between stores and customers.
For HP it may be a painful lesson, but any feelings of remorse should certainly be tempered by the fact that the company and product are receiving publicity on an unimaginable scale. They could have let the product fade into obscurity and sell a few more at full price, but instead they kicked off a fire sale. Something tells me that Russell Brand might regret this particular advert more now than he did at the time too. Indeed, it really does “work like nothing else”.