Amazon Kindle Fire HD strategy could be Apple margin headache

Amazon's move to mock the iPad mini price on its home page illustrates how the company plans to use its hardware as consumption vehicle model to its advantage.

Amazon is pitching its Kindle Fire HD directly against Apple's iPad mini on its home page in a move that also illustrates dueling business models.

Consider the nuances behind Amazon's home page campaign vs. the iPad mini:

  • Apple is primarily a hardware company and sells premium devices. 
  • Amazon is also selling tablets and aiming for high quality at value prices. 
  • Amazon's hardware pricing is cheaper because it'll sell the Kindle Fire HD at roughly cost and make money as consumers use the device .
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For now, both models co-exist well---and most likely will continue that way. However, Amazon is pushing its subsidized hardware model and if an entire industry goes that direction it will put pressure on the iPad mini.

When Apple launched its iPad mini it took direct aim at the Google Nexus 7. The argument was that the iPad mini was worth the $329 price tag, which was a bit high to a few analysts. Amazon is working the perception that the iPad mini price is too high.

All Amazon has to do is be in the same neighborhood as the Apple hardware features. Cheaper prices combined with a strong ecosystem may take care of the rest.

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