The Walmart of the web
The internet giant’s new tablet computer fits itsstrategy of developing big businesses by charging small prices
A couple of years after it launched its website in 1995, Amazon was the subject of an unflattering report entitled “Amazon.Toast”. The pundit who penned it predicted that the fledgling online bookseller would soon be crushed by Barnes & Noble (B&N), a book-retailing behemoth which had just launched its own site.
Far from being crushed, Amazon is doing the crushing. Borders, a once-mighty book chain, was flattened this year. B&N looks likea frightened capybara running from a fierce Brazilian she-warrior. Amazon is now one of the web’s most successful e-tailers. Even Apple is feeling the heat.
On September 28th Jeff Bezos, Amazon’s boss, unveiled a tablet computer called the Kindle Fire. It will compete with gadgets such as B&N’s Nook Color tablet and Apple’s iPad. The new Amazon tablet, which has a somewhat smaller screen than the iPad and only offers Wi-Fi connectivity, is likely to be just the first salvo in a titanicbattle.
9月28日，亚马逊的老板Jeff Bezos发布了一款名为Kindle Fire的平板电脑。它将与巴诺的Nook Color电子书和苹果的iPad展开竞争。新款亚马逊平板电脑的屏幕比iPad小几分，并且只提供无线保真网络连接，它的出现有可能是一场鏖战前的第一枪。
Like Apple, Amazon boasts a huge collection of online content, including e-books, films and music. And like Apple, it lets people store their content in a computing “cloud” and retrieve it from almost anywhere. But the two firms part company when it comes to pricing. The Kindle Fire, which will be available from mid-November in America, will cost only $199. That is far less than the cheapest iPad, a Wi-Fi-only device which costs $499. B&N responded to the Kindle Fire by cutting the price of its Nook Color to $224. This week Amazon also rolled out a new range of Kindle e-readers, the cheapest of which costs just $79. “We are building premium products and offering them at non-premium prices,” beamed Mr Bezos.
Amazon’s decision to undercut its rivals is partly a tactic designed to disrupt the tablet market, which is still dominated by the iPad. Gartner, a research firm, reckons that Apple’s device will account for almost three-quarters of the 64m tablets it thinks will be sold worldwide this year. Amazon’s pricing strategy also reflects one of the firm’s core beliefs, whichis that cheap stuff makes customers cheerful. Call it the Walmart of the web.
Low prices are not the only thing underpinning Amazon’ssuccess. The company is technologically adept, and it has a knack of delighting customers with innovations such as its $79-a-year “Amazon Prime” shopping service in America, which offers members free, two-day shipping and other benefits. Such goodies have been crucial to its growth. But its ability to drive down the prices of everything from cameras to cloud computing gives it a colossal competitive advantage.
A recent study by William Blair, an investment bank, underlines the price gap between Amazon and its rivals in the retailing world (see table). The report compared the prices of 100 randomly selected goods at each of 24 American retailers with those items that were also available on Amazon.com. It found that almost half of the goods were listed on the online retailer’s site too, and that Amazon’s prices for individual products were on average 11% below those of the stores. The study also noted that Amazon’s discounts were in many cases deeper than those offered by the retailers’ own websites.
Admittedly, as an online outfit Amazon does not pay sales tax in American states where it has no physical presence. Many cash-strapped states are now keen to pass laws that would change this—a move Amazon is loudly and unsurprisingly opposing. But the William Blair study concludes that even if it has to cough up more tax, Amazon will still be able to offer prices that are lower than many rivals’. The firm’s huge scale and its massively popular website, which it will use to promote the Kindle Fire, give it an edge. And it enjoys another advantage too. “Amazon does not have to worry about the impact of its pricing on a legacy store system,” explains Kirthi Kalyanam, a professor at Santa Clara University’s Retail Management Institute.
诚然，作为一个在线商业组织，亚马逊没有向美国的各州缴纳消费税，它并没有实体店。一些现金紧缺的州目前热衷于通过立法来改变这种现状，这一举动遭致亚马逊毫不意外的强烈反对。但是William Blair研究报告总结道，即便是亚马逊勉强同意缴纳更多的税赋，它依然能够提供比一些竞争者更低的价格。公司巨大的规模和其饱受欢迎的网站会大力推广Kindle Fire，这将是一个无可比拟的优势。同时，亚马逊还享有其他的优势。Santa Clara大学零售管理学院的教授Kirthi Kalyanam说：“亚马逊不会担心对销售留存系统的定价所带来的影响。”
Amazon Web Services (AWS), which rents computing capacity in its giant data centres to customers, has also won a reputation for being cheap. Comparing cloud-computing prices is tricky, but observers of the market report that AWS is typically one of the lowest-cost providers. “Amazon operates with economies of scale that are practically impossible to match,” says Reuven Cohen of Enomaly, which runs SpotCloud, an online marketplace where firms sell excess cloud-computing capacity.
The cloud is crucial to the success of Amazon’s gadget strategy. Most analysts think that the firm loses money on the hardware that it sells. But it hopes that its cheap tablet will be wildly popular and therefore boost sales of Amazon’s cloud-based content, just as the Kindle e-reader boosted sales of e-books. It’s like free parking outside Walmart—you want potential customers to see what’s in the window.
The good news for Amazon is that tablet users seem moreinclined to splash out on stuff than web shoppers who use PCs, according toForrester, another research firm. One possible explanation for this is thattablet buyers tend to be richer; another is that the immersive experiencetablets create encourages more impulse buying.
Whatever the reason, Amazon will have to hope that its gambit works, because its business model has at least one worrying downside. Its profit margin is a page-thin 3-4%, partly because it has invested so heavily in the cloud. Now it is going head-to-head with Apple, which made ajuicy $7.3 billion net profit on revenues of $28.6 billion in the latest quarter. Apple may not want to provoke a price war in the tablet market, where it sees plenty of growth to come. But if it does return fire, Amazon could get its fingers toasted.