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Fire Sale: Why Amazon Is After Everyone But Apple

Gordon Kelly

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According to this week's press hysteria Jeff Bezos is the new Steve Jobs and the Kindle Fire is the biggest rival to the iPad so far. There are just two snags: he isn't and it isn't. These are good things.

The misunderstandings make sense. In unveiling the Fire and new Kindle range Bezos provided the best Steve Jobs impersonation we're likely to see until Tim Cook takes the stage on Tuesday to (no doubt) launch the iPhone 5. Furthermore Bezos had just announced a tablet with an integrated music, video and eBook store for under half the iPad's price. The world witnessed the frenzied demand for HP's failed Touchpad based on nothing more than price alone, so clearly Apple execs must be shaking in their boots.

We doubt it. Amazon's recent hardware success has come down to a simple strategy: we don't need another Apple. Bezos may want to replicate Apple's sense of presentation, to convey style and intuitive design, and to imitate Steve Jobs if necessary, but critically he is desperate to illustrate his company's differences. "I really want to stress this point," Bezos explained in the only moment of repetition in his presentation, "these are premium products at non-premium prices. This is the way Amazon has operated for its entire history."

Amazon isn't mimicking Apple to threaten Apple. Amazon is learning from some of Apple's best aspects to threaten everyone else.

Why? At present Apple is virtually untouchable.

According to Gartner 73.4 per cent of all tablets currently sold are iPads, next biggest is Samsung with 5.9 per cent. Apple makes two thirds of mobile phone profits, could buy the rest of the mobile phone industry, has an 89 per cent customer retention rate and is the biggest company in the world. All of which proves one thing: to get to this position its competition is hugely underperforming.

This is where Amazon smells blood. The Fire has a dual core processor, runs Android at its core making it compatible with apps and it costs just $199. If you want an iPad you want an iPad, but if you are open to something else then why would you look further than the Fire? What's more Amazon is taking an extremely clever risk: every Kindle Fire sold will cost Amazon $50. The more Amazon sells the more money it will lose, and yet this isn't likely to matter…

LetsGo

October 2, 2011, 1:41 am

I think the opposite may have happened, Amazon may have given other Android hardware manufactures a opportunity to sell more product. if Amazon loses money on each tablet sold would they not allow other's to use the services which they make money on?

Jiggleton40

October 3, 2011, 11:12 am

There are least three contradictory estimates of the Fire's production cost, ranging from $150-$250. Please do some research before stating guesstimates as fact. Nobody knows the margins of the device other than Amazon. Also, being top in stock market value isn't quite the same thing as being the "biggest company in the world." There are companies with a larger scale of operations and higher revenue. Other than that, good article.

Gordon394

October 4, 2011, 3:22 am

The different speculations on construction came out after this was written, so contrary to your point I actually did all the research that was available at the time. As the following page indicates, I argue it doesn't matter whether Amazon makes or loses money in any case as it is all about selling more content.

"Biggest company in the world" is meant to be taken with a pinch of salt. How we quantify that could be another feature all in itself.

Otherwise thank you, interesting points.

Gordon394

October 4, 2011, 3:25 am

I suspect making a product at half the price of rivals which is exclusively locked into its own content and app store won't do that. Similarly the Kindle may have increased general interest in eBooks and the iPod in MP3 players, but it hardly did their competition any real favours.

As for content, Amazon will still allow other devices to buy content. It makes the company money so it would be daft to stop it. It would be like Apple refusing to sell iTunes content to anyone unless they had a Mac, iPhone, iPad or iPod.

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