retail news in context, analysis with attitude

Reuters reports that Amazon founder/CEO Jeff Bezos told the BBC in an interview yesterday that the various iterations of its Kindle tablet/e-reader is essentially being sold "at cost," with Amazon making its money on the sale of content.

While many analysts have speculated that this has been the case, it is said to be the first time that Bezos has confirmed the pricing strategy.

The story notes that the Amazon approach is different from that of Apple, which "makes much of its profit from hardware sales. It sells a single-sized iPad at costs ranging from $399 to $829, depending on storage capacity, screen resolution and wireless connectivity."

The Bezos approach to content and competition, by the way, also is illustrated by a story this morning in USA Today, which reports that Amazon is putting a lot of pressure on Netflix by "steadily boosting the menu of streaming movies and TV shows it offers its Prime subscribers for $79 a year. The online retail giant last month bumped up the number of titles in its video library that can be streamed to more than 25,000, sending shares of Netflix tumbling 6% the day it was announced ... The universe of streamed video on the Internet has vastly expanded, with a horde of new contenders entering the fray since the dawn of Netflix's business in 1997. What has become an exciting chapter for home video fans will likely be a pivotal period for Netflix, which does not disclose the number of videos it streams."
KC's View:
There are so many lessons here, but let me focus on what I think is the most important one - Amazon's willingness to abandon businesses that some might define as a core value.

Think about it. Amazon began selling hardcover and paperback books. But now, because the world has changed, Amazon probably would be fine if it never, ever sold another physical book. And it is willing to sell Kindles at cost to move as much content consumption as possible to the e-world.

It is still selling books. But it is happy to change horses whenever the culture and technology make it advisable to do so. It is happy to embrace change - even encourage and instigate change - because, as it says in the commercial, "normal just begs to be messed with."