A Forrester Research analyst has made a blog entry suggesting that Amazon could sell as many as 3 to 5 million Android tablets in the 4th quarter of 2011, if it prices them under $300. Forrester is issuing a report going into the rationale behind these findings in detail—of course, that report costs $499, so it’s not exactly light reading for the casually interested.
The report’s main author, Sarah Rotman Epps sums it up thus:
Even though Amazon taking on Apple is a bit like David taking on Goliath (compare the market cap, profits, and cash position of the two companies), Amazon’s willingness to sell hardware at a loss combined with the strength of its brand, content, cloud infrastructure, and commerce assets makes it the only credible iPad competitor in the market. If Amazon launches a tablet at a sub-$300 price point — assuming it has enough supply to meet demand — we see Amazon selling 3-5 million tablets in Q4 alone.
By comparison, it took Apple just 80 days to sell 3 million units of the original iPad—which means that Epps is predicting Amazon will do as well as or better than the iPad right out of the starting gate. Of course, Amazon will have the advantage that Christmas falls within the 4th quarter, whereas the iPad’s first quarter was spring to summer. And Amazon’s tablet will (hopefully) be cheaper than Apple’s, too. Still, that’s a pretty optimistic estimate on Forrester’s part.
And it depends on Amazon deciding it’s more important to get those tablets into peoples’ hands than to make a profit on them. Will Amazon sell at minimal profit or even a loss? They might be wise to—the iPad’s biggest advantage is its numbers, which gives rise to a network-effect-based feedback loop where more people are willing to develop for it because it has more users, and more users are willing to use it because it has more apps. Getting the tablet in the hands of as many people as possible could be its best move for long-term viability.
Of course, this does presuppose that the rumors are correct and Amazon is actually making a tablet.
(Found via PaidContent.)
Ok so I am supposed to believe that Amazon is better at selling tablets than HP who has experience in selling stuff like this. Sorry it just seems they think if they ignore enough facts they will win.
How can we be certain what Amazon sells? They aren’t exactly forthcoming with their sales figures to the general public. Judging from the language used in the Forester statement, they aren’t too sure of the numbers either.
Amazon’s strength: It has access to more content (movies and ebooks) than Apple. That’ll appeal to those who mostly consume content, especially if Amazon’s tablet comes with a powerful browser and special discounts on movies. Amazon’s weakness: Not just that there are fewer Droid tablet apps than iPad apps, but that Amazon itself has yet to generate a flow of innovative apps for the ePaper Kindle. For the iPad, because of the iPhone, we knew there’d be great apps. With Amazon’s tablet, though, there’s no such history, so we don’t know. That’s likely to deter those who create content in particular. Also, keep in mind that the hardware has to be impressively snappy. Anyone who wants can get a refurbished 1st generation WiFi iPad with 32 GB of storage or one with 3G data and 16GB for $400. Even if Amazon is able to sell their tablet at a loss-leading $300, quite a few people may decide all those nifty iPad apps (and the certainty there will be more of them) is worth $100. Amazon is a strong marketer, but so was HP and their TouchPad has become a bust. And price ratios are very important. I’m delighted by my Kindle 3 because its price was less than a third the price of an iPad. I don’t regret buying it, but don’t think I’ll be as impressed by an Amazon tablet whose price is merely 3/4 of what refurb iPad cost or that is selling for or 3/5s of what new iPads sell for. You can compete in a hardware market if both your device and the competition run the same apps. That’s what has driven prices for PCs down. But it’s much harder to compete if the two devices run different software. Apple has mastered the knack adding enough value to sell their products a bit higher.