August 8, 2011 | by Andrew Kameka
Practically nothing is known about the Amazon Android tablet, so everything you hear about the upcoming Android device is a rumor, gossip, or someone talking out of their kazoo.
However, that doesn’t mean there aren’t some interesting rumors to ponder. PCMag’s Tim Bajarin has spoken with sources who claim that the Amazon Android tablet could be cheaper than all other tablets from major brands. That’s because Amazon has opted for lower-costing parts, a cheaper manufacturer, and might even make its tablet a loss leader.
A “loss leader” is a business term for a product that is sold for less with the anticipation that money can be made in other areas associated with that product. For example, a company like Sony may sell a video game console for $400 even though it costs $420 to manufacture. That’s done because trying to make a profit from it’s true cost would price too many consumers out of the market. Instead, Sony sells at a reasonable price, builds a massive consumer base, and then makes money from video game sales, accessories, downloadable content, and subscription services.
According to PCMag, Amazon is considering a similar strategy for its tablet. The idea is to get the tablet into the hands of as many people as possible by being the affordable tablet. While Apple has the name recognition and other Android tablet makers jockey for second place, Amazon could appeal to the budget-conscious by selling for “20 to 25 percent below cost,” according to Bajarin’s sources. With that established base, Amazon could make up for the lost tablet profits by selling apps in its own app store, encouraging people to use its Cloud Drive or MP3 store, sign-up for its movie streaming service, and purchase eBooks from the Kindle bookstore.
Amazon has the services in place to support mobile entertainment needs, so why not take a loss on tablet sales if the end game is really to get people using Amazon for all their digital needs? It’s a risky strategy but one that could ultimately pay off.
How much do you think Amazon’s tablet should cost?