Amazon’s grand unveiling of the Kindle Fire tablet seems to have ignited some much-needed life into the struggling tablets market, with the online giant using price as its ultimate route to market success.
The aggressive $199 (£127) price tag on the Kindle Fire suggests a willingness to subsidise the new device so that it can aggressively grow its market share and challenge the dominance of Apple’s iPad models in Europe’s tablet market. The iPad had a 67% share in Q2 2011, according to IDC. Samsung’s Galaxy Tab family is its nearest competitor, with just 7%.
David McQueen, principal analyst at Informa Telecoms & Media, says: ‘At $199, the Fire is sure to be a highly disruptive product in the tablet market, particularly in the lead up to Christmas, and not only with other tablet manufacturers but also those that have yet to embrace cloud services. It is arguably the use of the cloud that could be the real game changer in the tablet market, although the Fire is going to put a lot of competitive pressure on both the Nook (from Barnes & Noble) and other tablet manufacturers in the seven-inch space.’
But this low price tag is an indicator of just how troubled the tablet marketplace has become for mobile manufacturers. The Kindle Fire may have been launched at a lower price point, but rival products like the HP TouchPad, HTC Flyer and BlackBerry PlayBook started with high prices and were heavily discounted just months after high-profile launches.
Ovum’s principal analyst Adam Leach says launching with an attractive price tag will be key to Amazon’s success: ‘The pricing is critical to gain traction in the tablet market, where the iPad has effectively become the de facto standard. It has slaughtered every Android tablet on the market, which have failed to attract consumers by matching the iPad’s price point without matching its content offering. However, the Kindle Fire has access to Amazon’s Kindle Store and is half the price of the cheapest iPad model.’
Marketing experts agree that launching into the market at a low price point and focusing on content consumption rather than 3G will be the Kindle Fire’s strongest asset in a stagnant market.
Alexandre Mars, CEO of Phonevalley and head of mobile at Publicis Groupe, says: ‘The iPad has worked well because it offered the same smart opportunities as the iPhone on a large screen.
The Kindle had the upper hand on books for so long, forcing Apple to rush out iBooks to compete. The Fire will present the same challenge to Apple because Amazon has a solid ecosystem behind it to sell more content. The low price will lure in consumers looking for a multimedia device.’
However, mobile buyers remain sceptical that the Kindle Fire will provide competition for the iPad, arguing that its reliance on Wi-Fi, rather than its own mobile connection will prevent operators from making any profit from the device.
‘It seems that tablet consumers and sellers start to behave strangely whenever the price for a tablet drops, no matter how unappealing the slate was at a higher price only a month ago. So the price point is right, but no mobile company will make anything from it. If anything, it may be a new mobile marketing success,’ one says.
Amazon does have one advantage over other manufacturers – millions of people already visit its site on a regular basis, which may make it a new ‘sleeping giant’. Perhaps this will be the key challenge for operators looking to find their place in the fast-changing tablet market.
The Kindle Fire’s attractive price may enable it to join the iPad as one of the few successful tablets. So where does that leave everyone else?
Informa’s McQueen says: ‘Amazon will finally prove to the world that size doesn’t matter but value for money does, which will be a big lesson for RIM and for other players who have already tried to launch tablets with seven-inch displays or less. I believe this launch will mark the second phase of the market development for tablets, where product differentiation, brand competition, and price elasticity will be the main drivers.’