Originally Posted by Gatorguy
What many might be missing is that, AFAIK, there's never been any confirmation that Amazon really is losing money
on each Kindle Fire sale. I know that some analyst(s) guessed
that's the case, but there's other sources who believe Amazon is making a slim profit on the hardware sale. One of those is quoted here:http://www.bgr.com/2011/10/03/amazon...e-50-per-unit/
Now, this I can understand!
If these figures are reasonably accurate... basically, at a cost of $150
1) AMZN can direct sell the Fire through its online store at $25% gross profit
2) AMZN can push some or all of that 25% margin to resellers based on volume -- and still break even
What is also interesting is this:
If the chart is Accurate, Apple's cost for a 16GB WiFi iPad 2 would be about $235 with a retail of $500.
1) Apple can direct sell the base iPad 2 through its online store at 50% plus gross profit
2) Apple can push half of that margin down to the resellers based on volume -- and still make 25% gross profit.
So the best reseller has these two tablets:
1) Fire @ $200 with $50 profit
2) iPad 2 @ $500 with $125 profit
The reseller cannot reduce Apple's iPad 2 price more than a few dollars.
The reseller can, likely, sell the Fire at any price he cares to.
Lots of ways for the reseller to go here...
1) Bundle accessories, peripherals, content/apps, gift cards, warranties, services (either or both)
2) Heavy discount the Fire as a loss-leader and up-sell the iPad when possible
3) Package the 2 -- 1 for Mom and Dad, 1 for the kids
3) Manufacturer Promotionals/Comps/SPIFFs if any
The question in my mind: when you see the Fire side-by-side with the iPad 2, is MSRP, alone, enough to make the Fire sell -- if not, what then?
With a qualified customer and a knowledgeable salesman -- the Fire could be either a good deal
or a bad example!