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New media is buzzing about the recent announcement by Amazon that it will soon offer a 7-inch tablet device at a low price. Adding further fuel to the tablet wars, they’ve also decided to lower the price of the Kindle across the board with the lowest priced model selling for $79. 

This is not really much of a suprise. In fact, when all talk over the iPad being a “Kindle-killer” when it was first introduced, I was one of the few voices in the blogosphere  saying that Amazon was in a better position market a tablet device similar (in some ways) to an iPad than Apple was to displace Amazon as the dominant online bookseller.  In fact, despite efforts by Apple and the mainstream publishers to clamp down on Amazon, the Kindle store has only grown in popularity. This does not mean that the new Kindle Fire can go head-to-head with the iPad necessarily, but I do think that a tablet device (assuming it’s a good product) selling for under $200 is too good a deal for many to pass up.  It may hurt Apple a little (I think realistically, it could cut into Apple’s IPod Touch market (Indeed, with both an iPhone and an iPad on the market, the iPod Touch was already becoming a little irrelavent at its current price point.  The Fire may offer an alternative for the iPod touch and other tablet devices. While the iPad would still dominate the tablet market, it would take a small hit and the iPod touch would take a bigger hit as those who prefer the iPad would still want an iPad, but those who hate the iPad, but would likely buy the touch might more easily buy the cheaper Fire.

 

With the Kindle Fire, Amazon is making its first foray into [the] tablet … market where [the] iPad dominates …. The Android-based Kindle Fire is an impressive media tablet, and Jeff Bezos understands that the device itself is only part of the equation. It is merely the front-end of a set of end-to-end services which will deliver digital media from Amazon’s servers to people’s hands.

But the Kindle Fire is no iPad, and Bezos knows that too. So he is using something else to differentiate the Fire from the iPad: price. The $199 price of the Fire surprised almost everyone. It is $300 lower than the cheapest iPad 2. So even if it is not as fully featured, doesn’t work as smoothly and will launch with a laughably small number of apps (less than 1 percent of the number of apps available on the iPad, which is currently over 100,000), all of that may not matter. Because if it is good enough, millions of people will decide to buy it….

One of Amazon’s advantages as a retailer with scale has always been price. And it is using it effectively with the Kindle Fire, which is already the second-best selling Kindle on Amazon (the first is the new $79 Kindle). There is a reason the Kindle Fire is not launching with 3G service, and only WiFi. Amazon had to do everything to get it down to that $199 price point.

Bezos … is doing everything he can to carve out a new space in the tablet market for Amazon, … price is a big part of it. In a letter to customers that is currently on the homepage of Amazon, he “punches Apple hard,” in the words of investor John Borthwick. The letter starts:

There are two types of companies: those that work hard to charge customers more, and those that work hard to charge customers less. Both approaches can work. We are firmly in the second camp.

Bezos made the same point during the launch announcement of the new Kindle line last week. “We are building premium products at non-premium prices,” he said. 

 

 

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