Amazon’s $50 Fire Tablet will Shake Up the Tablet Market

on September 16, 2015

On Sept 17th, 2015, Amazon released three new tablets I believe could serve as a catalyst to help jump start the market in terms of units shipped. At the upper end is a 10” tablet that will sell for $230 with 16GB of storage and an 8” model with 8GB of storage. Both models have a Micro SD slot and, for about $17, you can upgrade to 32GB. For $24.99, you can have 64GB of storage. Note the prices. Amazon is being very aggressive and these should be big sellers over the holidays. However, the tablet they launched for $50 is the most interesting. This is called the Fire 7” edition. It has 8GB of storage and also includes a SD card slot for additional storage. At this price, Amazon has to be selling this at cost, but they clearly believe it can be strategic to them for a couple of reasons.

First, the 7″ Fire is pretty much a portable multimedia player. One of its key reasons to exist is for videos, movies, and other streaming content. If a person has Amazon Prime, they have access to thousands of movies and TV shows as well as music. In essence, this tablet is a front end to Amazon’s broad range of content. It will also be a great portal into Amazon’s shopping services. One can use it to buy anything Amazon sells using a highly mobile and secure device. The second reason it is strategic is it helps Amazon extend their brand into homes and families in a broader way. At $50, it’s almost a no-brainer to get one of these for each kid in a family. Or for that matter, have one in each room. Since I test tablets, I already have a tablet in every room of my house and it is very handy to be able to pick one up at any time and use it for a specific purpose.

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.

While I like the new 8” model, the more interesting of the two pricier versions to me is the 10” tablet for $230. Amazon will be offering a optional keyboard case with it and, in a sense, this becomes Android’s answer to the 2-in-1 models Microsoft, PC vendors and Apple, with the new iPad Pro, are offering this fall. A few weeks back, I wrote here in Tech.pinions that I believe there is a market for an Android laptop. I reasoned that, for most people in the world, their introduction to personal computing has come through an Android Phone. It seems logical, as they become more computer literate, that many of them may want to graduate to a larger tablet or even a laptop. But the idea they would make the jump to a Windows PC as their first true PC is hard to imagine. Indeed, it makes more sense that these folks, who cut their teeth on Android, may want an Android-based large tablet or a laptop with a UI they already know and can use without much of a learning curve. Even if they will use it for productivity, they now have many of the same tools on Android that are on Windows, plus tons of Android apps that cover a broad range of user’s needs in a form factor that goes beyond their smartphone.

Together, I can see how these three models can drive a lot of sales of tablets for Amazon and, if the $50 model has strong demand, it could even drive the overall market for tablets up by as much as 10-15% from where it is today. It will be hard to tell how much they impact Amazon’s bottom line though since the low cost model is clearly a loss leader to drive more services and product purchases and tracking that is difficult. And I suspect the margins on the two other models are about 7% to 10% at best. However, at the strategic level, I see these tablets as big winners for Amazon and should help them have a pretty good holiday season.