Thursday, November 1, 2012

Is Amazon.com, Inc. (NASDAQ:AMZN) making money From Its tablets?

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. 

1 comment:

  1. This really isn't a complicated business plan. Of course it works. Low prices + huge selection = happiness.

    Just 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.


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