Analyst sees Amazon pricing its tablet at $249, using it as a loss leader to profit elsewhere

Analyst sees Amazon pricing its tablet at $249, using it as a loss leader to profit elsewhere
How can a newcomer like Amazon quickly gain market share in the Android tablet wars? According to Creative Strategies analyst Tim Bajarin, the answer lies in the price that Amazon will ask for its device. Bajarin speculates that the Amazon tablet will go for a lowball price of $249, becoming a loss leader. Amazon would make up the difference by selling apps, movies, music, books and other goods. The more tablets sold by Amazon, the more profit the retailer can grab from its other products

As you might expect from an analyst, Bajarin took pencil to paper and made some computations. the analyst figures that Amazon will sell 3 million tablets this year at a loss of $50 per unit sold. The $150 million loss (assuming that Amazon sells out its entire production) would be made up within 6 months after launching the tablet from selling the apps, content and other goods. Bajarin sees a profit of 10% to 30% on the tablet "over the last 18 months of the tablet's accounting period."

This would give Amazon a major advantage over the competition moving into 2012 if Amazon quickly takes the top spot due to its low price. The analyst sees the possibility of a whole family of Amazon products, and with the number of Android tablets sold expected to more than double from 19-20 million units this year to 44-45 million in 2012, there is plenty of money to be made.

At this point, we still have no idea what the Amazon tablet is going to look like. A rough estimate calls for a 7 to 10 inch screen (duh!), dual-core processor from NVIDIA or TI, and of course Android aboard. Amazon's own Appstore is expected to be on board while Google's own apps and Android Market could be AWOL.

Amazon's strategy is similar to how Avon and Tupperware do business. They want to get a foot in your door, and once inside, sell the heck out of you. Whether the retailer has a strong enough product that is compelling enough for you to open the door in the first place, is a question that will be answered in the not too distant future.

source: AndroidandMe

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10 Comments

1. cheeseycheeser

Posts: 413; Member since: Mar 24, 2011

I'll take 4

2. Dr.Phil

Posts: 2474; Member since: Feb 14, 2011

Kudos to Amazon for bringing Android to the masses. Whether you like an Amazon tablet or not, you have to admit that a tablet at this price being brought to the marketplace is good for those who cannot afford the $500 tablets therefore making less people become left out of the tablet world. I just can't wait to see people carrying something besides an ipad.

3. Immolate

Posts: 310; Member since: Jun 17, 2011

I believe that most people would be willing to pay from $100 to $300 for a tablet, depending on size and capability. I always thought $500 and $600 tablets were completely ridiculous for the value the delivery. I've also been confident that Amazon would be the company to bring that reality home, for two reasons. First, they are very big-picture and look beyond the cost of getting efficiencies of scale up to snuff. Second, they can't have missed the fact that the Nook Color has become extremely popular.

4. Bashok

Posts: 36; Member since: Dec 14, 2010

i'll def buy this know that XDA will hack it and make it a full fledged android tablet!

5. biggles

Posts: 269; Member since: Oct 15, 2009

I've stayed away from tablets due to price. If this is indeed true, I will almost definitely be in for one at that price point. Time to re-adjust those ipad3 sales projections - lol.

6. nyamo

Posts: 274; Member since: Mar 19, 2011

if this is true i'll finally consider getting one. while i love the idea of a more portable means, i can't justify the price for lack of productivity they bring. $250 maybe but i think they will come out with some sort of super saver deal to get it closer to $200

7. DigitalMD2 unregistered

As cell carriers like verizon and AT&T continue to restrict and impact cloud content models like IPAD and IPhone with their data rate restrictions and higher data cost, a Amazon tablet could become even more viable as a competitor using pre-purchased stored content vs. cloud content. Go Amazon....

8. remixfa

Posts: 14605; Member since: Dec 19, 2008

concidering they will be pimping the hell out of that tablet on amazon.com and its bargain price point... it will sell like hotcakes. Especially if it has good specs with all that. I can quickly see that becoming an XDA favorite. And if it does.. if they can hack back on google services, and do whatever else to it, I might pick one up too. A $250 dual core (hopefully 8.9inch+) with a decent screen resolution and hacked to all heck and back by XDA tablet for sale? you got my attention.

9. dandirk

Posts: 187; Member since: Aug 04, 2011

Rumors are saying it will be a 9" ARM cortex A9 (dual core 1.5) running homeycomb. For $250, it will be the go-to device for the rooters/ROMers out there. Google apps will be a VERY simple add-on depending how stock Amazon keeps it. The only competition even close to that price point is the nook color and Archos. Their specs range from Ti OMAP 3621 @ 800Mhz to Cortex A8 at 1Ghz. All of which are 7" displays. This looks to be the budget tablet of the year, at a price point many will buy into.

10. jcoberg10

Posts: 112; Member since: Oct 30, 2009

if they can do it financially, go 10 " that way there is no arrgument against it. but even at 9" i'm in.

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