CEO, Jeff Bezos, on the
event of the launch of the revamped Kindle series of tablets for the holiday
season revealed, and relieved the doubts of many. The tablets are not very
lucrative in terms of income and profits for the company. Since the tablets are
sold at dirt cheap prices, the online store, Amazon.com, Inc.(NASDAQ:AMZN) does
really earn from the hardware.
The company, upon good sales of the tablets,
breaks even, since it sells the tablets at very cheap rates, which are very close
to the cost of the making of the tablets. Ever since the launch of the Fire,
the doubts about how much money Amazon can make out of selling the devices at
such cheap rates, was being speculated upon, by many. Even if the company is
not making money off the hardware, it is not like the company makes a lot of
money out of the content which is bought through the hardware. In fact, the
situation with the content is often worse.
Amazon, after the
advent of the Department of Justice taking on the company, as well as Apple,
for allegations of price fixing, has resorted back to pricing the goods they
offer for sale, as they deem fit. They often end up selling e-books and such
things below the required amount. This leads them to run big losses. They have
often sold books which have been heavily discounted. Even in the cast of music,
Lady Gaga’s “Born this way” was sold at 99 cents, only. Also the Prime
customers enjoy a lot of benefits, which makes one wonder how Amazon ends up
making their money.
The trick which the
company employs is to keep their customers through the abnormally low prices.
The customer is kept happy, and this brings about the true source of revenue.
Advertisements keep coming up on the devices, and one has to pay a little extra
to switch these adverts off. These adverts are sure to appeal to the customers,
and more often than not, the customers end up opting for at least some of these
adverts. The company makes sure that the customers stick around, because of
their low prices and good products, and therefore, this ensures more sales
through the adverts, for the advertisers.
This really isn't a complicated business plan. Of course it works. Low prices + huge selection = happiness.
ReplyDeleteJust last night my wife and I were lamenting that we lost a movie in one of our sets and wanted to watch it without going to the store. 3 minutes later, it was streaming to my computer (which I hooked up to our TV), and at a price cheaper than we could have found it at Wally's World.
I love Amazon.