Amazon.com Inc. (Nasdaq: AMZN) may have what it takes to take on Apple Inc. (Nasdaq: AAPL) in the handset market, according to a Forrester Research Inc. analyst. In fact, Amazon is better positioned to lop off a chunk of the market controlled by Apple than many of the major competitors in the tablet sector, including Samsung, Motorola Mobility, and HTC.
Sarah Rotman Epps, a Forrester researcher, said in a report that Apple is about to face a "nasty competitor" willing to "sell hardware at a loss." She said further:
With 28.7 million iPads sold worldwide to date, Apple's lead in the tablet market looks invincible. Enter Amazon.com, whose tablet can compete on price, content, and commerce. If it's launched at the right price with enough supply, we see Amazon's tablet easily selling 3 million to 5 million units in Q4 alone, disrupting not only Apple's product strategy but other tablet manufacturers' as well. Apple will maintain a strong lead in market share, but Amazon will gain ground quickly and give product strategists from media, software, retail, banking, and other firms a reason to kick app development for Android tablets into high gear.
Epps' comments confirm that Amazon may be planning to get into the tablet PC market. It has sold millions of its Kindle reading device, and it makes sense to expand the functionality of that unit to make it competitive against the iPad or any other tablets in the market. Amazon cannot continue selling a single-use device when the reading functionality of its Kindle is being incorporated into gadgets from rivals.
It's also highly likely that Amazon -- if it introduces a tablet -- will use the Android operating system from Google (Nasdaq: GOOG). To gain market share, though, it will have to be willing (as Epps pointed out) to accept a lower margin on its tablet. The company has demonstrated a willingness to do this -- it has used that strategy effectively against other e-reader rivals, because it also sells e-books and can spread out its costs over both hardware and software.
A price war is, in my opinion, inevitable in the tablet market. (See: Apple Can Be Beaten.) Rivals are envious of Apple's huge market share, and now that it's obvious they can't win on design, spin, and functionality, they will most likely expand their arsenal to include pricing and lower profits. I am convinced this is inevitable because the tablet is potentially too critical to future growth strategies at PC-centric OEMs for Apple's rivals to give up. They must compete harder and expect Apple to respond in kind.
This brings me to what may be the sole fault line in Epps' argument. Apple is not winning just because it has the best product or the greatest ecosystem. It is also arguably price-competitive with its iPad. This has become even more obvious as competitors have failed to introduce devices that are cheaper than Apple's. Devices from Samsung and Motorola Mobility, for instance, have been in the same price range as the iPad.
Lastly, a price war will not hurt only Apple. If Amazon enters the tablet market with devices that are much cheaper than the iPad, this will also hurt other contenders for its market share. Consumers will be the biggest winners here, but component and contract manufacturers should brace for a bruising squeeze.
Bolaji, I agree with you: Apple is also winning because it's very price competitive. Any device that has more-or-less the same ballpark specs as an iPad also ends up being in the same ballpark price-wise. Some are a little cheaper, some are a little more expensive, but there's nothing out there that is essentially a near-iPad clone that runs Android and is $399.
Amazon entering the market is super interesting, and they're the best positioned to compete against Apple. My big question is... what price point are they going to launch with? $499 is an impossibility. $399? Hmm. That sounds about right, but it's worth noting that the Kindle DX -- which is essentially the same screen size as an iPad 2 -- is currently selling for $379.
Now I know that Kindle price drops and new models are on their way, but on one hand it seems a little ambitious to think that Amazon can launch a viable iPad competitor for $399. Yet the essentially need to be at this price point... and maybe even cheaper than that! $349? I think that's probably just about right: $349 for the base model, maybe it's only 8 GB or something.
Anyhow, this is why in an earlier post I speculated that the TouchPad wouldn't be the best tablet deal you'd see all year, because if Amazon comes in with an aggressively priced tablet -- as you point out -- where is this going to leave Asus, Acer, Toshiba, Samsung, Lenovo, Motorola, etc.? At least one of them is going to slash prices and abandon ship if their inventory isn't moving.
While HP moving out of tablets' market was a surprise so is Amazon possibly entering this market. Amazon is uniquely well position due to large customer base for Kindle and name brand recognition. The question is how much software can subsidize hardware and is it leagal? That move by Amazon will be very interesting.
With recent reports, there is an indication that the Amazon Kindle’s price is much cheaper than iPad. Taking into account the current economic situation, many consumers do not want to spend $500 to buy a tablet, the price advantage will help the popularity of the Amazon tablet.
Isn't it too soon for them to enter a price war? It's a relatively new market.
How can Amazon compete with that? What are the selling points of the kindle? Cheap, extremely long battery, light, etc. Can they create a "pimped" kindle that can compete with the iPad? They have good amount of content but Apple is clearly above all.
What becomes of the current Kindle line if Amazon introduces a cheap(-ish) tablet? Do they drop Kindle Reader prices still further and make it the entry-level prouct? Do they deprecate it and put all the eggs in the Kindle Tablet basket?
A company's willingness to cannibalize its own products for a new market is one indicator or its likely staying power. Bezos has the cojones to do that, as did Jobs.
"Pimped" up or not, the sale of kindles will go up if Amazon is able to pull off the price, content, and apps close to the ipad functionality. Amazon has the commerce to compete, and teaming up with Googles android wil boost both compnies sales. Add going to the developing countries with a comparable tablet at lower price will certainly put a dent into Apples dorminance at least.
So far Kindle has only been an e-book reader and is yet to come alive as a proper tablet. If the rumors about it being Android based is true, then it will have to compete with so many other Andrioid based tablets in the market such as Samsung Galaxy, Motorolla Xoom and Dell Streak before it comes close to competing with Apple. The tablet market is becoming rather saturated and any new player will face tough competition. However, given Kindle's success as an e-book reader, it might win over a certain section of consumers who are looking for tablets primarily for e-book reading.
"Add going to the developing countries with a comparable tablet at lower price will certainly put a dent into Apples dorminance at least."
Ms. Daisy,
A tablet in the line of offering as much similarity to the iPad as possible with the benefit of a lower price would definitely have a strong impact in the mearket. Now, what do you think it would happen if Apple one sunny morning decides to lower the price of its iPad just as a good experiment? Let's say Apple lowers the price of the previous iPad models when launching the iPad 3?
It will be a great delight to see the price of ipad3 come down, but it is not likely. For purpose of argument, the competition will now be between the e-readers and the ipad enthusiasts. Apple and Amazon will now have to compete for those who are either new to the two or just plain frugal and do not need all the frills that ipad has.
I read an interesting article about the tablet war on The Economist. This article goes into some details about the price disparity and consumer psychology. It seems not only Amazon but Barnes&Noble's Nook can become a competitor to iPad. Amazon is also entering into cloud service and is providing 5 GB of data storage for free for music collection. So, it seems that Apple will face some competition in coming times.
Well, the current Kindle is not in the same league as any tablet. It's a book reader with very limited apps.
I don't know how many people use their tablets to actually read books (exclusively), but from what I've experienced angry birds is doing pretty well with the iPad!
Amazon is uniquely positioned. Its got the muscle to compete on price slashing war. I think for Amazon to succeed in this tablets price war, then Amazon must be prepared to produce a device close to ipad. Bolaji, I agree, "price war is inevitable". This will certainly be interesting to watch and equally favourable for the consumers too should this happens.
Was I the only one who was sick and tired of all analysts consistently going Ga-Ga over Apple???
Its about time somebody stepped up to the plate and challenged the Cupertino Giant.
I was looking through some trends and was amazed.
Together Dell,HP and Acer control 45% of the PC market in the US.
HP has now announced that they are looking at exiting the business entirely.
Acer announced major losses(& job losses this Quarter).
That leaves just Dell among the OEMs to take on Apple.
Its about time these guys got their acts together into an area as critical as Tablet computing(especially if they want to stand up and be counted here).
"
a price war will not hurt only Apple. If Amazon enters the tablet market with devices that are much cheaper than the iPad, this will also hurt other contenders for its market share. Consumers will be the biggest winners here, but component and contract manufacturers should brace for a bruising squeeze
It would be interesting to see Amazon bringing out a new tablet on to market. This shouldn't be like a simple kid on the block. This tablet should have Android and equal performance hardware like ipad. I do not think they can have too low prices but a 100$ below ipad could help.
Didn't see that one coming...still think of Kindle as an e-reader. I've also read that with some downlaodable software a Kindle can gain much of the same functionailty of an iPad. So it makes sense this could happen, but I wonder about the support infrastructre Amazon provides. For better or worse, Apple still supports its products really well.
True, and raises the question of whether an "Amazon Store" might be in the works along the lines of the Apple stores. Now may not be the time for Amazon to open storefronts for their devices in California. The sales/use tax dispute surrounding Amazon has led to a bill to limit the ballot initiative process.
Kindle and iPad should both be financial successes. But competition between the two will only get fiercer as the market for e-readers and tablet computers heats up...
Amazon might make itself different from Apple and other android tablets, thanks to its strong cloud-based services. However, the device itself will not be any better than iPad.
What will be Amazon's innovative contribution? It should not be very difficult to understand consumer need and innovate new unique features. What processor will they use - will it be MIPS or ARM? Is Amazon interested in RIM takeover. It will help them in tablet market.
By moving to the core of the industry and offerings services that keep the system humming, a group within the electronics market has rendered irrelevant the question of ownership and control of the supply chain.
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Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
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You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
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