Hewlett-Packard faces a potentially fatal retail catastrophe today following its snap decision to massively discount the price tag on its new TouchPad tablet computer.
Despite having only been launched two months ago, HP TouchPads were on offer for just $99 (£60) from Friday (August 19th) onwards. Hundreds of thousands of US consumers placed online orders as well as grabbing what stock remained in stores. A so-far unknown number of those online customers have now been told that their orders will not be honoured even though credit and debit card authorisations have been taken.
The largest number of public complaints have been directed at US bookseller Barnes & Noble though there are also Twitter reports of cancellation emails from hp.com itself as well as leading retailer Best Buy, hardware specialist CDW, Carphone Warehouse, business supplies specialists Staples and Office Depot, and resellers at Amazon.com.
While immediate criticism is being directed at the retailers themselves and their internal inventory management, HP is unlikely to escape blame given that its own e-commerce division has been cited and the breadth of the cancellations.
Any attempt to sell or spin out the hardware business will treat the quality of its retail channel as part of the valuation and that channel has undoubtedly suffered serious damage as a result of the TouchPad discount debacle.
However, the handling of the stock run-down is also likely to damage HP’s reputation as a vendor of information management software given that the company itself has failed to match demand and fulfillment following the TouchPad price-cut to supply.
Prices in the UK for the two versions of the device dropped to £89 and £115, down from an original retail selling price of circa £399. As the news of the discount spread over the internet, it has been reported that Dixons’ e-commerce operation drew the highest number of simultaneous visitors in the history of online shopping in the UK. As in the US, thousands of potential shoppers were left disappointed as the demand vastly outstripped available inventory.
At time of writing, HP had issued no statement on the order cancellations.
Although the company announced last week that it is quitting the consumer hardware business, its handling of the logistics behind the TouchPad inventory burn-off could wreck any attempt to spin out or sell that business and seriously call into question its desire to now focus on enterprise level hardware and software.
It is estimated that HP’s decision will cost the company over £60 million.