Amazon.com Inc., the world’s largest online retailer, has announced that customers have purchased around 1 million of it’s Kindle e-book readers and tablets every week for the past 3.
Wonder which product made the biggest splash? It was the Kindle Fire. Announced 11 weeks ago now, the Kindle Fire sells for $199 and has actually become the best-selling product on Amazon.com. It doesn’t seem to be losing steam either as sales of the Kindle Fire have risen week-over-week for the past 3, according to Amazon.
The Kindle Fire is Amazon’s newest iteration of its immensely successful Kindle series. It’s also their first foray into the tablet space. A bit smaller than the “traditional” tablet, the 7-inch display runs Google’s Android operating system and is less than half the cost of Apple’s (least expensive) iPad; the benchmark for tablets the world over. And even with its numerous flaws, no external volume buttons, apps running slowly, the touchscreen being to inaccurate, just to name a few, customers can’t seem to resist.
So how has Amazon been able to be so amazing? The answer is that the tablet itself isn’t where they make money. On the contrary, IHS Inc. says Amazon is losing money on every Kindle Fire it sells. But that isn’t necessarily a problem for Amazon because the revenue generated from the books, videos and other material users will purchase from Amazon will make up the losses. In fact, according to Susquehanna Financial Group LLLP Amazon might generate as much as $384 from all that will be bought to fill up the tablet.
Another reason that Amazon might be resigning itself to a small, if at all, profit margin on the Kindle Fire is because it just wants to “play the game.” Seeing the use of tablets grow continuously since Apple launched the iPad, Amazon may just want some of the market for itself. Apple Inc. is still the domineering face of tablets, with an estimated 66% market share at the end of 2011 (according to IHS.) But estimates for the Kindle Fire at 14% for the same time period “ain’t bad” considering it hit shelves on Nov. 14th. As an analyst at BGC Partners LP stated, “They’re getting traction by selling no-profit hardware. Bad for margins, but it is giving them some [market] share.”
Only time will tell if the Kindle Fire has staying power though. The holiday season’s shopping might be inflating the demand for the Kindle Fire and there’s also the user-end issues to takeinto consideration. Amazon has certainly rocked the boat in the tablet arena with its Kindle Fire, but what will make it a true contender in this writer’s eyes is if Amazon can put forth a quality product at such a cheaper price. If the software updates can address consumer problems, then the Kindle Fire has the potential to become a whole lot more important for consumers wishing to purchase a tablet. Watch out Apple, Amazon’s gunning for you.
