Now here’s a business plan. Make something cheap. Then sell it even cheaper.
It costs Amazon $209.63 to make its tablet computer, Kindle Fire, according to an analysis by market intelligence firm, IHS iSuppli. It’s selling them for $199. Click here to read the analysis.
IHSiSuppli counts this as a good strategy. “The Kindle Fire, and the content demand it stimulates, will serve to promote sales of the kinds of physical goods that comprise the majority of Amazon’s business,” it’s report says.
But it’s buy low, sell lower. Airlines tried this in the early 2000s, selling tickets below costs to grab market share. Mostly where it landed them was bankruptcy court. Amazon is rich enough to gamble, but pound for pound, the iPad is going to be hard to beat.
September 30, 2011
Bad comparison, Al. Amazon hopes to make money from each Fire from selling content (apps, books, music, etc.) The airlines didn’t have any way to earn any significant additional income once they sold you the ticket.
The price point of the Fire is perfect to compete with the iPad. For many, the iPad is just too much money for a non-essential piece of electronics. Add to that the beauty of the Amazon Cloud service – whatever electronic media you buy from Amazon remains available on Amazon’s Cloud forever, for free.
Personally, I have a first gen Kindle, and it’s perfect for reading books. The e-ink technology allows me to read in direct sunlight, something I can’t do on my laptop, and you can’t do on the iPad or on the Kindle Fire.