You've got to wonder why
) has been so cagey about releasing hard numbers on sales of its
Kindle devices. Especially after a
from Consumer Intelligent Research Partners that estimates about
20.5 million of the devices were in the hands of consumers as of
the end of September.
But here's a much more interesting number: Owners of Kindle devices
spend about $1,233 per year on Amazon, compared to $790 per year
for customers who don't have a Kindle.
And, they make purchases 50% more frequently than Kindle-less
Investors have always perceived the Kindle as a media-buying device
as much as a media-consumption device. But nobody guessed just how
much money was being uploaded to Amazon in return for downloads of
books, movies, music, and software, not to mention all those
one-click orders for hard goods.
Those kind of numbers might quiet some of the criticism of Amazon's
take-no-prisoners pricing strategy for its branded devices. Its
strategy is so aggressive, in fact, that some analysts don't
believe its claim that it breaks even on the devices.
The devices now range from about $69 for the smallest e-reader to
$379 for the latest, fastest, and biggest Kindle Fire HDX tablet.
For the holidays, Amazon has even introduced a special offer for
the top-of-the-line model, a no-interest installment payment plan.
(Fail to pay an installment, and no more downloads for you.)
The Kindle is one of the two juggernauts in Amazon's strategy to be
the store for absolutely everything. The other is Amazon Prime, the
$79-per-year membership loyalty program that offers members free
shipping, among other benefits.
This is a good time to mention that the strategy hasn't borne fruit
yet. Amazon is still losing money.
Its supporters say it's building infrastructure on a massive scale
for the future.
, like Seeking Alpha's Paul Santos, say, well, Amazon is still
It's hard to imagine exactly how Amazon can continue to expand its
customer base or its product offerings.
Here are three ways it will work on both goals in 2014.
First, there's Amazon Pantry, a program designed to change the way
Americans buy the dull (and non-perishable) necessities of life,
like laundry detergent. First reported
, and not yet officially confirmed, the program will be available
only to Amazon Prime members.
Amazon already stocks the full range of packaged goods. Its Pantry
program is designed to coax Amazon Prime members into regular
orders of packaged goods, by offering "wholesale" prices and
reasonable delivery charges.
In short, it's going up against
) and the rest of the big-box discount shopping emporiums that
offer good prices on the basics, not just detergent but canned
goods and even cereal.
By limiting the program to packaged goods, the company cut much of
the prohibitive cost: No warehousing of highly perishable fresh
goods; no Amazon trucks speeding through the suburbs on demand.
The company also hopes to offer a reasonable shipping rate by
defining and limiting shipment size. A customer will fill a box of
a certain weight and size with goods, to qualify for a set shipping
Exclusive Video Streaming
The second strategy for 2014 is not brand-new. It's a game of
), its video-streaming rival, won huge word-of-mouth and critical
praise for two original series,
House of Cards
Orange Is the New Black
Emmy Awards are nice, but that isn't what this is about. It's about
getting a hit show, an exclusive, first-run series, and limiting
its access to Amazon Prime members.
The new entries in Amazon Originals are the sitcom
and a political satire,
. The shows were the top vote-getters among 14 pilot episodes
introduced earlier this year in a customer-ranked competition.
Expansion in Grocery Delivery Business
Amazon has been slow-it says "thoughtful and methodical"-in getting
into the grocery delivery business, taking six years so far to test
the market in its hometown, Seattle.
Now, AmazonFresh has rolled out its delivery service in San
Francisco, following its introduction in Los Angeles. Officially,
those markets are tests, too.
Despite the obvious logistics and cost barriers, fresh produce
delivery already has plenty of competition, from the new and trendy
FreshDirect and PeaPod to the old-line
(EBAY) is trying to get in, through eBay Now.
Unless and until Amazon gets those drones in the air, this one
still sounds like a nightmare in the making.
And yet, there's another reason why Amazon wants all those bright
green trucks rolling through city streets: They're carrying many
other products-non-edible but higher margin products-for one-day
delivery to Amazon Prime customers.
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