Two unofficial reports suggest that Amazon's forthcoming Kindle Fire tablet will sell very well at $199, but the cost of components may mean that Amazon will make little if any profit on the hardware. However, this was predicted. Amazon already sells Kindle e-readers at close to break-even or less, making up the difference in increased sales of ebooks and other products.
American research firm eDataSource was first off the mark with a press release estimating that "sales of Amazon's new Kindle Fire reached 95,000 units during the first day that the device was made available through Amazon's website." This was almost four times its estimate of 25,000 sales of the other three new Kindles announced at the same time.
These estimates are based on "purchase receipts received by email" from "eDataSource's panel of 800,000 inboxes", according to chief executive Carter Nicholas. "Within hours we can get a read on hot product launches based on sales from leading eCommerce websites," he said.
Further unconfirmed evidence appeared earlier today. In Leaked Sales Numbers Suggest Amazon Kindle Fire On Track To Outsell iPad [Exclusive] , the Cult of Android blog said: "A verified source within the Seattle based online retail giant has provided Cult of Android with exclusive screenshots of Amazon’s internal inventory management system Alaska (Availability Lookup and SKU Aggregator). These leaked shoots show that orders for Amazon’s Android-based tablet are racking up at an average rate of over 2,000 units per hour, or over 50,000 per day."
"Those numbers make the Kindle Fire’s launch likely to be the biggest tablet launch in history, beating both the iPad and iPad 2 in first month sales."
The Cult of Android's blog post added: "Despite selling for up to $100 less, the 6-inch Kindle Touch is being outsold by the Kindle Fire at a rate of ten to one, and has only racked up about 20,000 pre-orders to date. The numbers for the $149 Kindle Touch 3G are even worse: only a few more than 12,000 people have ordered one so far."
The price is right
The Kindle Fire is attractive partly because it's half the price of an Apple iPad 2 or the RIM BlackBerry PlayBook, which is a similar 7-inch tablet. Research company IHS iSuppli has performed what it calls a "preliminary virtual teardown" of the Kindle Fire -- it doesn't have a real one to take apart -- and put the "bill of materials (BOM) cost at $191.65. With the addition of manufacturing expenses, the total cost to produce the Kindle Fire rises to $209.63", says iSuppli.
Presumably the number has been heavily influenced by the PlayBook, which we know is made by the same Taiwanese contract manufacturer, Quanta.
Amazon stands to make about $10 in profit on each Kindle Fire sale, including content and accessories. However, the payback will come not just from sales of ebooks, TV programmes, movies, apps, games and other digital content but from sales of physical products. iSuppli says:
"The importance of this strategy cannot be underestimated. So far, no retailer has managed to create an umbilical link between digital content and a more conventional retail environment. With Kindle, Amazon has created the most convincing attempt at this yet, and it is doing so by using established retail tactics: deploying content to get shoppers in the door, and then selling them all sorts of other goods. This is exactly how Wal-Mart, Target and others use a similar weapon -- in their case, DVDs. If doing this means that Amazon must take a loss on the sales of digital content and tablet hardware, it will be well worth it in the end."
Amazon is extremely unlikely to confirm any of this speculation. It has remained extremely secretive about its earlier Kindle e-readers. It hasn't provided any numbers to support its claim that the third-generation Kindle was Amazon's best selling product of all time worldwide.
However, Kindles rapidly occupied the top 12 spots in the Amazon.com Best Sellers in Electronics list, with the Kindle Fire being followed by the new ad-supported $79 Kindle (not available in the UK). The $99 Kindle Touch took third place with and the $149 Kindle Touch 3G in fourth.
If current orders turn into regular sales, Amazon could certainly ship 20 million Kindles a year. This would put it in a very comfortable second place in the e-reader/tablet market behind Apple's iPad.