Price Will Be Driver of Amazon Tablet Sales

Forrester Research has released a report ("delayed a week out of respect for Steve Jobs") that argues Amazon's forthcoming Android tablet(s) will potentially sell 3-5 million units in Q4. This report, in "the works for months," can be boiled down the following:

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.

The analysis can be further distilled into two points that argue Amazon's got a shot at success:

  • Amazon's brand strength and marketing muscle
  • A sub-$300 price point 

I agree that Amazon's brand and marketing capabilities will give its tablet(s) a head start. But it's really price that will be the driving factor here. That's the lesson of the TouchPad buying frenzy: people are willing to buy an iPad imitator at the right price. In that case it was $99 and HP took a major loss on the inventory.

I own the Samsung Galaxy Tab 10.1 and the user experience is woefully inadequate compared to the iPad. I won't enumerate the ways but the device doesn't hold a candle to the iPad (Apple shouldn't be so afraid of it). 

Any tablet Amazon sells under its own brand, based on the Android OS, will also be inadequate by comparison. There are no tablet apps on Android, for example. Accordingly it will have to be very aggressively priced to succeed. 

Kindle: The #1 Bestseller on Amazon

The most expensive "regular" Kindle is sub-$200. The larger "Kindle DX" is $379. Pricing a color Android tablet that doubles as an eReader (which they will have to) at less than the cost of a DX kills the DX. 

If Amazon were to price a 10-inch Android tablet at $499 it would suffer nearly the same fate as all of Apple's tablet rivals to date: failure. If it goes down to $300 or $299 it will sell (especially with 3G built in). However, given the poor quality of the Android tablet experience in general at this point, it's far from certain that it will sell as many units as Forrester predicts. 

We'll have to wait for the device and see how "good" it is. Regardless, price is going to be nearly the lone determinant of success or failure for Amazon. 

Related: Changing demographics of tablet owners