Is Amazon's E-Reader Strategy Going to Work? - It Could Be Marketing Genius

Most of the tech savvy folks have heard of Amazon's new FIRE tablet computer, this is both an E-reader and is also a Wi-Fi enabled tablet. Amazon is selling these units at about a $100 loss for the hardware, of course they will make up the money later because what you have one of these devices chances are pretty good you will go to the Kindle store and download e-books to read. Therefore they will make money over time because you will be buying e-books from them.

That seems like a rather brilliant strategy, and it's not too much different than AT&T allowing you to buy a cell phone for under its retail value as long as you sign a service contract. Additionally, this FIRE tablet computer is silly for only $199, well below the cost of an iPad, or any of the other tablet computers now on the market. Some call it an iPad killer, which may or may not be the case, but at that very low price they are sure to get a good chunk of market share.

There was an interesting article in the Wall Street Journal not too awfully long ago that noted that fewer than 8% of the affluent members of our society own a tablet computer. They can certainly afford the $600 iPad, but they choose not to have one, as they really don't need it, this same crowd, the affluent members of our society, do own smart phones however, and they do tend to buy e-readers for themselves and for gifts. They also tend to be some of Amazons best customers for online sales, especially books.

There was a very interesting article in Reuters on October 25, 2011 which discussed Amazon's E-Reader Strategy titled; "Amazon profit forecast disappoints, stock slumps," by Alistair Barr. The article stated;

"Amazon shocked investors with a far weaker-than-expected outlook for the crucial holiday season quarter as it spent heavily on its new Kindle Fire tablet computer. The stock lost 12% as the news raised concern that Amazon was losing some of the revenue momentum that had helped investors overlook its razor-thin profit margins."

Of course, needless to say there is more to this story, as is always the case, even though "the company; "also said it could report a $200 million operating loss to a $250 million operating profit in the holiday quarter as it spends on the Fire and other initiatives."

Now then, let's talk about the HP case study, when Hewlett-Packard decided they would no longer be selling their tablet computer, and since it was a close out they decide to sell them for $99 at a number of the retail stores which had them for sale. It turns out that their entire inventory that HP had on hand plus all the HP tablets in the stores, in all of the chains, sold out in a few hours.

This shocked everyone, but it also made everyone realize that there was a desire and a demand for these products, just not at the $400-$600 price point. So far, we cannot know if this risky play by Amazon will bear fruit, but chances are it will, and this gutsy move may go down as marketing genius in future business eBooks for sale on of course Amazon. Please consider all this and think on it.

Lance Winslow has launched a new provocative series of eBooks on Future Concepts. Lance Winslow is a retired Founder of a Nationwide Franchise Chain, and now runs the Online Think Tank; http://www.worldthinktank.net