Amazon.com appears to be following an aggressive pricing strategy for its Kindle E- Book reader keeping in the mind the long term view in order to increase its share in the competitive market where Smartphone devices are consolidating their positions.
The company announced lower than expected second-quarter operating margins last week and experts say it is mainly because of increased investment in its businesses and increased marketing costs for Kindle.
The latest version sells for $139 which is about a third of the original Kindle and nearly half of the price of the second version that was on sale until five weeks ago. The aggressive pricing is expected to attract more users to the device.
However experts warn that is it unlikely that the device will become what Amazon terms as ‘mass market’. It would be difficult for a dedicated e-book reading device to attract occasional readers.
Amazon CEO Jeff Bezos has said earlier that Kindle would be attractive to "serious readers which he says would be around 10% of the population. Out of these serious readers many are expected to follow books from friends and may not be attracted to the device.
According to the estimates of Jefferies & Co. analyst Youssef Squali, Amazon has sold between 3.5 million and four million Kindles. The device is facing stiff competition from Apple iPad that offers many more features than just reading and is said to be more user friendly. Apple sold more than 3.3 million iPads in June this year after its launch.
Amazon offers its Kindle books to iPad users and some say that the users may shift to Apple's iBooks store. Apple has been working aggressively to level with the offering of Amazon. Apple has signed deals with most major publishers and now offers similar prices on e-books as Amazon.
Barnes & Noble's Nook is also a competitive player in the segment. Some experts say that it is possible that the company is loosing money by selling the device at $139 a unit. Competition from high priced Apple offerings would have helped it raise prices and improve margins.
