So Amazon’s marketing in on fire, It is literally on fire, for much rests on the success of the Kindle Fire, its answer to the Apple’s iPad. And now a UK launch is imminent.
In the US the product is selling big time, the message is spreading like… well like wild fire.
The thing about the product is its price. The products are cheap, and they are cheap for a very good reason. Amazon sees the products as a means to promote its online shopping experience.
So, in other words sell the hardware as cheap as you can and make money when your consumers start using your hardware, going online and buying from your store. There is another way of putting it of course, give away the razors, make money on the razor blades.
It is just that Amazon’s boss Jeff Bezos doesn’t like to put it that way. He told Tricia Duryee at Allthings D “We do not like the razor and razor blade model, where you lose money up front and then somehow make it up on the backend. We also do not like the other model, where you make a lot of money on the device, because it doesn’t follow our approach “ see Making Money While Keeping Prices Low: Amazon CEO Jeff Bezos Explains It All (Mostly)
But the real point here is that Amazon’s model is different from Apples’s. Apple is a hardware company and it makes money from hardware, income for the iTunes store is good to have, but it is not core.
But these days we are seeing different business models converge. So Google makes money from advertising, and promotes its model via the Android. That’s why it can give the operating system away for free.
The Amazon Fire is an Android with the Google disabled, and replaced with an Amazon bit. Incidentally, in the US Amazon is now offering a version of the Fire with the Amazon interface taken out, but you have to pay more for the hardware.
But is there really a difference between online advertising and the online shopping promoted by Amazon? Well, maybe there is a literal difference, but really what Google does is make money from promoting goods, available from third parties, that you can buy on the Internet. Amazon makes money by selling products on the Internet that are available from third parties.
So Amazon, Google and its family of hardware partners, the Nokia/Microsoft alliance and Amazon are all chasing a similar source for revenue.
But they are not just competing with each other, they are competing with Wal Mart and Tesco too.
But this begs the question, if Apple and Google are using hardware to promote sales of ‘stuff’ why aren’t the big traditional retailers doing the same?
Over the last year or so Tesco has made three acquisitions in this sphere. It has bought digital radio company, WE7 and digital-movie streaming service Blinkbox. Last week it also announced the purchase of online book store, Mobcast – which was started by ex SAS man not to mention author Andy McNab.
The Tesco deals are interesting, but they are small fry.
In a few years time, its big rivals will be Amazon and Google, and perhaps Apple. Hardware products, especially smart phones and tablets, will form part of the battle ground.
Tesco has to dig trenches, and lay down fortification in this battlefield.
That’s not easy. Innovators dilemma explains part of the problem here. Market leaders find it very hard to adjust when an industry sees radical change. Such a dilemma explains Kodak’s descent from market leader to Chapter 11, it explains why RIM, the company behind Blackberry is having such a torrid time, and it explains the challenges facing Nokia. It may yet prove to be a problem for the likes of Tesco and Wal Mart.
©2012 Investment and Business News.
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© Investment & Business News 2013