Why Amazon will underprice their new tablet

In Amazon Could Sell 3 to 5 Million Tablets This Year, a recent article in eBOOK NEWSER, it was reported that a new report by Forrester Research ($500 to buy a copy), that Amazon will price their new tablet device under $300 which would likely allow them little or no profit. Yet they stand to sell 3 to 5 million units this year. So why would they do that?

This really is a no-brainer. All you have to do is look at the evolution of Amazon’s core business strategy. From the very beginning, Amazon took a loss in order to dominate the market. How many of you remember industry experts scratching their heads in the late 90′s and early 2000′s as Amazon operated at a loss year after year. Now look at the company.

Follow the money. How does Amazon make the cash register ring. Yes, they’re making tons on selling Kindles. But that is only their “best selling product” (singular). How many thousands of other similarly best selling products do they have? Cumulatively, those sales dollars dwarf Kindle sales.

In the case of their Kindle Digital Publishing platform, it’s the eBook sales that are going through the roof. What are people using to buy those eBooks and read them? The Kindle. It’s like the old marketing strategy of giving away the razor and making your bones on selling the razor blades. Why would their tablet(s) be any different? Who knows what new revenue streams they will develop using their tablets as the user interface and the delivery device?

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