Tablet penetration is forecast to hit 70% by 2017 with smaller models set to dominate, new research from Telsyte shows.

The technology analysts found more than 5 million people in Australia were using tablets by the end of last year, with Apple making up around 70% of the 2.4 million units sold throughout the year.

The arrival of the iPad mini in November 2012 buoyed Apple’s sales, Telsyte says, which were being eroded by the flood of cheaper Android products hitting the market. Samsung claimed 9% of sales across the year, while the next closest competitor, Asus, accounted for 8% of sales.

The smaller form factor appears to be where the future of the market lies, with 7 to 9-inch tablets forecast to exceed sales of 10-inch devices by 2014, and a decline in cellular-enabled units expected as the home emerges as the main location of use.

“Low cost and smaller form factor media tablets, typically without cellular connectivity, are shaping the market,” Telsyte research director, Foad Fadaghi, says.

By 2013 Telsyte forecasts tablet penetration to hit 50% of homes, supporting figures in Nielsen’s ‘Australian Connected Consumers‘ report, and by 2017 prevalence of the device is expected to reach a level comparable to today’s smartphone user base.

Despite a slow start, Windows 8 tablets are expected to steadily grow in popularity, particularly with the business market, younger users and consumers looking to replace aging laptops.

The study also found tablet related ecommerce is booming, with half of all tablet users having purchased a physical product or service via their devices in 2012. Some categories are approaching similar rates of ecommerce uptake as on computers, such as event tickets and travel related purchases. Telsyte expects this trend to continue as more shopping and catalogue applications appear in 2013.

“The explosion in commercial transactions on media tablets highlights the importance of a multi-screen strategy for digital advertisers and retailers,” Fadaghi says.

Telsyte’s ‘Australian Media Tablet Study 2013-17′ surveyed a representative sample of 1000 Australians.