Amazon: Risky Business?

The Amazon’s Kindle Fire HD has joined the fierce competition of tablets; fighting alongside Apple, Asus, Samsung, and etc. But what makes the Kindle Fire HD so special is that not only a tablet but it is an affordable tablet. Amazon has implemented a strategy that no other companies would dream of doing. Amazon’s CEO Jeff Bezos acknowledged that they are selling their Kindles at cost; which means that they are not making profit off each Kindle they sell. However, what Amazon is doing is they want to as many consumers to buy their Kindles by keeping the prices low. In turn, their profit will come from selling their Kindle books, videos, and games. With this approach, Amazon is measuring the Kindle’s success by the amount of content Kindle owners buy on them.

Is Amazon playing a risky move by executing this strategy?

As a consumer, do you favor this strategy?

Do you think Amazon can stay in the tablet competition?

Would you purchase the Kindle Fire HD?


Read more:

9 thoughts on “Amazon: Risky Business?

  1. Yes a risky move because it is giving up higher margins on tablet sales for potential increase volume of book sales.As a consumer you would favor it because you are getting a tablet at a cheaper price. As long as amazons tablet can compete on quality then it can stay in the game. If I needed a tablet than yes I would buy amazons because it is at a cheap price and is reputed to be functional.

  2. I don’t believe this move is all too risky because it is actually common when technology companies partner hardware products with software products. Apple does this with it’s iPhone, where the App Store closes a margin gap for them. Even more so, Sony’s Playstation 3’s have extremely low margins for them, but they make due with the cut of revenue they get from games, as well as their digital store featuring games,movies, and tv shows. I feel this a good strategy for Amazon considering their high standing in the e-book market. The only threat I see is Google’s recent pursuit of a deal with publishers, that would most certainly cut into Amazon’s market share concerning e-books.

  3. I don’t believe this is a risky business at all as well. For example, think of the kindle as a subscription to a magazine. You may have an amazing deal for the first six months of the magazine that you subscribed to, in which this case would be the purchase of the Kindle. But in order to keep receiving this service you must at a premium and that is where the true profits and value come from. By having to pay for the online books, Amazon can make profits through the sale of the books and not from the initial purchase of the Kindles. By saving money on the kindle, maybe customers would be willing to buy more apps/books/ etc?

  4. I believe profits can be found in different ways for different companies. For instance, Costco maintains very low margins on its products compared to other stores such as Walmart because it charges a monthly membership fee. If Amazon is able to stay relevant in the very crowded market space for tablets by taking their profits on the back end, then that is just what they should do. I think it was very wise of Amazon to implement this strategy and hopefully it works out for them.

  5. In a way Amazon’s Kindle Fire HD is a genius move. They are reaching the consumer demand for a multi-functional tablet at an affordable price point. Although they may not be initially making a large profit from their sales, the Kindle line has proven very successful in the past and the prospect of the profit margin for Kindle Fire HD growing grealy is very positive. Due to the fact that they are a firmly positioned company financially, taking the profits on the backend will not prove to be a risky move.

  6. I don’t believe this is a risky business for Amazon’s Kindle Fire HD. Like other tablets out in the market, the product itself costs around $300 or more and in addition to the tablet they would have to purchase apps to make additional profit out of the product. For Amazon to sell their product at cost, in the beginning they will see a low margin, but in a long run the profit for the Kindle slowly increases. Consumers typically look for affordable tablets if they are not loyal to a certain brand so I doubt they’ll get themselves into any risky business because the Kindle itself already successful.

  7. I agree that this is a good move by amazon. I also like the comparison to the magazine subscription. Amazon has proven that they can compete in the tablet market. They are now putting out a tablet closer to that of its competitors in terms of functionality. Sure it is a risky move selling it at the cost of production, but so is introducing a product that does not exist yet. There needs to be some risk taken in order to be rewarded. But if amazon is planning to make money off of their apps, books, etc then they must have a fully stocked store that is innovative and consistently updated. Which I’m sure they are fully capable of doing. Again, it is risky but I think it gives them the leg up when competing on price. Especially in a market that has stiff completion, which may become even more so with the rumored introduction of the iPad mini. The key is their content. If they make this their priority, which I’m sure they will, they will have no problem making up for their lack of profit coming directly from the sale of the kindle. As others have already said, as a consumer I would definitely favor this approach and I see them having no problem competing. They may not be the market leader but they will be profitable and will compete against the likes of apple and google.

  8. I believe that with the competetive advantage for all tablets that amazon needed to create a unique product with a low price. It is not that risky on the consumer side, we are only looking for quality and assurance that the product is going to do what it says its going to do. I think amazon is going to come out on top by creating a lower price rather than its competitors. Thats what DELL started doing at the beginning of it’s business and their sales went through the roof once they became a reputable brand.

  9. I believe that this was definitely a great move for Amazon. The Kindle Fire does a great job of defining itself in the tablet market as a low cost, high quality item. In addition, I have heard that the tablet has many of the same features as its top competitor, the iPad. I think the creation of the Kindle Fire was also an excellent way to extend the Amazon Kindle brand a step further. This tablet will allow for increased purchasing of Kindle featured books, videos and games which will generate an overall increase in revenue. Personally, I feel that the Kindle Fire definitely has a competitive advantage over the iPad by having a lower price, and could potentially give Apple a run for their money if consumers begin to realize that the Kindle Fire and iPad have the same level (if not better) quality but the Kindle Fire is half the price.

Leave a Reply

Your email address will not be published. Required fields are marked *