Those companies struggling to connect with consumers right now should take a hard look at Amazon.com (NASDAQ: AMZN). By a little price tweaking and a lot of innovation, the company’s aptly named Kindle has been so hot AMZN is burning through inventory faster than suppliers can keep up.
The latest proof of the Kindle’s success comes today, with word that Amazon has sold out of its newly re-priced and slimmed down Kindle. So much for predictions of the e-Reader’s doom in shadow of the Apple Inc. (NASDAQ: AAPL) iPad.
Still, it’s worth noting that the Kindle sales have been sparked in large part by price cuts. That means it’s too soon to tell whether Amazon cut prices too much too soon, or whether it has found the sweet spot to connect with consumers.
Amazon sold out of both the $189 version and the cheaper, smaller, lighter, and faster $139 version of its e-reader just days after announcing their launch with 3G and Wi-Fi upgrades. The company website is asking Kindle-hungry readers to order now to “reserve your place in line” to get the low-priced units delivered once inventory has been replenished sometime around the beginning of September.
The aggressive consumer demand for the new third generation Kindle follows a recent trend of strong market performance and exceeding industry expectations by Amazon.com, whose CEO Jeff Bezos shows no signs of slowing down.
“There’s going to be a generation 10 and a generation 20,” Bezos said in a statement. “We’re trying to build something that’s great for long-form reading—something you’d use if you want to sit down and read for two hours.”
The news of the Kindle sell out comes only days after Amazon’s announcement that for the first time its electronic titles dramatically outsold hardcover titles in June, with 180 e-books sold for every 100 hardcovers. That’s just the beginning too, according to Amazon. CEO Bezos told USA Today that he expects paperback sales to be eclipsed very soon too – perhaps in the next year or so.
“People forget that Kindle is only 33 months old,” said Bezos in an interview with USA Today last week.
That may be working in Amazon’s favor as the CEO claims – or it could work against the tech giant later. After all, the absence of any real competitor on the eReader front has allowed AMZN to suck up market share in this new category. As electronic publishing becomes more mainstream and replaces many print forms, you can bet competition will be more fierce and the stakes higher.
But there’s no denying that being first in line has been great for Amazon. Kindle has been the driving force behind the recent success enjoyed by AMZN investors. Thanks to the gadget, Amazon’s e-book sales numbers from this time last year are up by more than 200%. And in its recent earnings report AMZN boasted quarterly growth in net sales of +41% and estimated next quarter’s growth to range between 27% and 40%.
Although Amazon seems to have shareholders optimistic about the e-reader battle with Apple’s iPad, and Barnes & Noble’s (NYSE: BKS) Nook, concerns do exist for how long and at what price the Kindle can remain relevant to tech consumers.
So for now, AMZN shareholders can rejoice. But to borrow an analogy from the book world, we’re still only in the first chapter of the electronic publishing revolution. There’s little doubt that the Kindle has had great influence by being the first on the scene, but that does not mean it will remain as dominant forever.
To that end, AMZN must continue to keep prices competitive and innovate to remain on top. Bezos seems to believe wholeheartedly in that, with his projections of a Kindle Version 20.0. Still, Bezos would be wise not to consider the door closed to new technologies. After all, the same innovative spirit that spawned the Kindle could very well give a competitor some gadget that would send Amazon’s e-Reader to history’s dustbin along with typewriters, VHS tapes and other passed-by technologies.
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