I recently ran a survey asking consumers what categories they have prioritized on their Holiday Season shopping list, either for themselves or as a gift. Here are the results.
As you can see, it looks like tablets will again have a good holiday quarter, as they typically do. I can see a product like the $50 Amazon Kindle Fire doing exceptionally well during the holidays as more and more consumers get drawn to the idea of low-cost tablets for pure entertainment consumption for the car, shed, living room, etc. As we learned last holiday season, this low-cost tablet dynamic is a trend I expect to continue.
Tim Bajarin, also of Creative Strategies, wrote on Tech.pinions back in September when Amazon launched its current device portfolio:
One important thing to note about the Fire 7 is that this is a quality device. Today, most tablets in the $65-$99 range are of poor quality. In fact, the ones I have purchased in Asia when traveling have all died since they were not durable or even all that functional. But a quality tablet at $50 in the US and other markets where Amazon sells products is an eye catcher and I think they know there will be a lot of interest in them. One unique marketing move by Amazon is to offer a “buy 5 tablets get one free” promotion. They believe that, at $250 for 6 tablets, a lot of people will buy them over the holidays as gifts for family members and even business colleagues.
It will be fascinating to see the acceptance of this product in the market but my gut tells me they will sell a boatload of them and it will be an important tool to help them grow Amazon Prime and related services.
(Highlights by me.)
It is not unreasonable to think that those $50 Fire tablets are either loss leaders or at least sold at cost.
The question remains wether these gadgets are good (and durable) enough to become storefronts for Amazon.
These cheap tablets can certainly function as a gateway drug to the gadget world of Amazon. Remember though that Amazon’s goal is not to sell you these devices but it is about how you are going to use them once they are in your home. Are people buying media from Amazon on these cheap tablets? Are they shopping on them? They might, but only Amazon knows for sure at this point.
That being said though at this point in time it doesn’t really hurt Amazon to sell more, not less gadgets. Unit economics are more favorable at scale and the learnings for Amazon are more insightful the bigger its gadgets business is. And last not least every Amazon gadget is part of a bigger ecosystem, a bigger plan, if you will.
That is the context for the rather insane looking “buy 5 tablets get one free” promotion.