How Amazon can top the tablet marketSeptember 12, 2012: 12:43 PM ET
The Kindle-as-service model means that Google and Apple should watch out
By Don Sears, contributor
With a full slew of new tablets, e-readers and consumer-minded features, Amazon (AMZN) is in full WWE-style smack-down mode. The online commerce overlords are screaming for your wallet, pointing directly at the competition and establishing another foothold in a young market.
At its latest product announcements in Santa Monica last week, the company expanded on its Kindle Fire tablet line in the 7-inch and 9-inch space looking to undercut Google's Nexus 7 and Apple's iPad. What is evident is that Amazon has done its market research and understands it has the consumer clout (and its own cloud) to build on its own success. With a truly retail penchant around price and convenience, Amazon is primed (unintentional pun) to crush holiday sales.
There are, however, some issues to contend with: expensive and challenging contracts with content providers, potential for 'cannibalization', and overall content sales themselves. Luckily, tablets are still an emerging segment with business models all over the map. Now that all the major players of consumer tech -- Apple (AAPL), Google (GOOG), Microsoft (MSFT), Samsung, and Amazon -- are not just at the same crowded playground, but at the same set of swings, it's incredibly fun to watch how aggressive some companies are getting.
Apple focuses on design and profit margins reflected in its retail pricing. But even Apple can't stay out of the mid-range market, as it is rumored to be announcing a smaller tablet in October. It remains to be seen how much profit will compress as Apple's version gets smaller. With the Nexus 7, Google, the other major player, is going after the low-end volume sales of tablets similar to the traditional PC market.
With smaller tablets, Amazon saw an opportunity. Last year, in a place where no major brand with a knack for customer service or major content offers was competing, the company opened up a stream of customers eager for a more affordable experience. The Kindle Fire was born.
Here is why Amazon can and will play in the these spaces:
It's easy to covet the iPad -- it is a gorgeous device, but it is pricey. A $200 tablet with an HD retina screen that you can easily hold in one hand is mighty appealing, especially if someone is already sold on the way Amazon works as an online retailer. It is possible to buy two smaller tablets at $200 and an Amazon Prime subscription for $79 for less than the cost of one iPad (membership includes streaming movies and free two-day shipping on everything for a year).
How many people despise shopping at the mall over the holidays? Prime helps with non-tablet media-centric products. As a superstore retailer, Amazon competes on household items beyond streaming services. The dollar has now been stretched.
But what if a customer wants a larger tablet like the iPad but doesn't want to spend that much? The mid-range, 8.9-inch Fire starts at $299 and one priced like the iPad that includes 4G LTE and some data is included at a higher price point ($549).
Google, Apple: You have been served.
Hardware features are customer-centric too
Amazon positions the Kindle Fire as a service for content delivery, rather than a pure hardware play, but its hardware isn't something to laugh off. The honing of customer focus is reflected in the features of the Kindle Fire HD. Customers want it to look great, hence the 1280x800 HD display. They want to watch movies read, and play games in challenging lighting conditions (hence the polarizing filter and anti-glare technology, which has shown to be a notable improvement according to a preliminary review by Consumer Reports; dual antenna for better Wi-Fi; a front-facing camera for Skype calls; and dual speakers with Dolby Digital sound for improved audio which impressed Consumer Reports, calling it "the best we've heard from a 7-inch tablet, including surprisingly distinct stereo separation for speakers that are only a few inches apart."
Features appeal to large buying segments: families
The parental control features in the Kindle Fire HD are easy to overlook, but speak to the surfeit of uses of these devices have across age groups. Anyone who has seen the intuitive action children take with tablets knows they are powerful devices. Media consumption and the ability to regulate its use is a very smart tactic by Amazon, showing again it comprehends and anticipates its customer's needs.
Let the tablet wars begin!