By Rimma Kats
March 29, 2012
Does Amazon pose a threat to Apple?
Amazon’s Kindle Fire has seen significant success since it first emerged in the mobile space and industry experts believe that the tablet will continue to gain traction in the coming months.
Although marketers do not believe that Amazon’s Kindle Fire is replacing Apple’s iPad, the tablet is quickly becoming an on-the-go device. Additionally, sales of the Kindle Fire are increasing daily.
“There is no question that Amazon has seen significant success with the Kindle and is likely to see more of the same as time progresses,” said Seth Elliott, senior vice president and chief strategy officer of Engagement Media Technologies, Miami.
“Amazon reportedly sold more than 4.5 million Kindle Fires in the fourth-quarter of 2011 alone, which suggests that other than the iPad, the Kindle Fire is the go-to tablet of choice,” he said.
“Amazon, of all entrants, is best suited to compete with Apple and the iPad – indeed, with the exception of pricing where Amazon is particularly competitive in the mass market; there are some remarkable similarities in the market strategy between Kindle and the iPad.”
According to Mr. Elliott, Amazon essentially controls the entire continuum for the customer base – from the core Kindle device to the content that users consume.
“This end-to-end strategy – from a company that already has a powerful distribution position for books, movies, music and television – is extremely powerful,” Mr. Elliott said.
“It offers users a comfort that content will be readily available on their device, and leads to a better user experience,” he said.
Pricing helps Amazon.
Amazon sells its Kindle Fire for $199 in hopes of gaining most of the money back through media consumption purchases, while Apple’s iPad 3 costs $499 and the iPad 2 costs $399.
A lower-priced tablet is appealing to consumers. Additionally, the smaller screen size makes it easier for consumers to carry throughout the day.
“Kindle Fire prices out at $199, less than 40 percent of the cost of an iPad,” Mr. Elliott said. “Mass market buyers are far more price sensitive than early-adopter technologists – that price point undoubtedly is another key reason for Kindle's continuing market penetration.
“Of course, it does not hurt that Amazon also actively pushes Kindle to a significant install base – millions of existing Amazon customers,” he said.
“With the business model in place – content, distribution and mass-market price-point – it looks like the Kindle Fire is here to stay.”
According to Chia Chen, senior vice president of the mobile practice at Digitas, Boston, Amazon’s Kindle Fire is the one tablet – besides the iPad – that has gotten significant traction in the marketplace.
“The Amazon Kindle Fire definitely qualifies as a real on-the-go tablet,” Mr. Chen said. “What the Kindle Fire has is a pretty clean and well-lit ecosystem for content.
“That is what distinguishes it from just about every other tablet, except for the iPad,” he said.
Amazon’s Kindle Fire is a great media consumption tablet, per Mr. Chen.
“A huge number of people have gotten music, videos and books from Amazon,” Mr. Chen said. “And all of it goes easily onto the Kindle Fire.
“It is also priced very competitively,” he said. “There is good reason to believe that Amazon will continue to find success with the Kindle tablet – or tablets – if the rumors are true.
“As Amazon continues to add value to its content ecosystem, refining the hardware and improving the overall experience with the Kindle Fire, many people will find the value story compelling. Of course, it is also true that Apple has npt stood still and it will be interesting to see whether they will launch something that is more directly competitive to the Kindle Fire in terms of both size and price in the coming months.”
Not everyone views the Kindle Fire as an on-the-go tablet.
“I would not classify the Kindle as a tablet computer. I would call it an ereader with a color screen,” said Wilson Kerr, vice president of business development and sales at Unbound Commerce, Boston.
“Ereaders are very popular, because they solve a problem for consumers sick of lugging around bounded stacks of heavy paper books,” he said. “Basic ereader models with black and white screens costs under $100 or about the cost of 5 paper books.
“A tablet, on the other hand, is a powerful, loaded and portable tool with full-time connectivity designed to offset the need for a laptop. With the Fire, Amazon has added a color screen and some bells and whistles, but they lean back on downstream book sales to offset upfront margin considerations. This will move product but they are likely selling to a different customer than Apple.”
Because the Kindle is primarily an ereader for the display of Amazon-sold and branded digitized books, it is trusted by consumers and seen as a good value, per Mr. Kerr.
“Amazon is a hugely popular brand with a No. 1 global value ranking in 2011,” Mr. Kerr said. “I think there is such explosive growth in this area right now that both Apple and Amazon will do well.
“However it should be noted that the Kindle has not impacted iPad sales in any real way,” he said. “Apple sold three million iPad 3 devices in the first weekend and have sold a total of 55 million of these devices globally.
“Profits are at an all-time high and Apple is now the most valuable company in the world. Amazon recently announced that profits had plunged 58 percent as they scramble to support the Kindle with backside infrastructure.”
Rimma Kats is associate editor on Mobile Marketer, New York