In an interview with the BBC, Jeff Bezos admitted that the online retailer sells the Kindle Paperwhite and Kindle Fire HD at cost, making the company literally no profit on the devices, Mashable reports.
“We sell the hardware at our cost, so it is break-even on the hardware,” Bezos said. “We want to make money when people use our devices, not when people buy our devices.”
Amazon CEO’s remarks is the first time the company to confirmed long-held Wall Street assumptions that it did not make a profit on sales of the popular tablet.
Amazon’s strategy contrasts to that of Apple‘s, which makes a profit on every device. Bezos’s made it clear that his company’s aim is to a medium to consumers that can help deliver Amazon’s online content which have much higher profit margins.
“We want to make money when people use our devices, not when people buy our devices,” Amazoin’s Chief executive told reporters.
The Cupertino based tech giant sells its iPad at costs ranging from £399 to £659, depending on various features such as storage capacity, screen resolution and wireless connectivity, while Amazon’s Kindle Fire goes on sale at the price tag of just £129.
“By offering consumers a tablet that costs as little as possible to then purchase the company’s own online content over and over, Amazon is making a strategic move in both customer acquisition and retention,” suggests Forbes.
A Kindle Paperwhite may be sold to a consumer for no profit by Amazon, but all the content that a user will buy thereafter will undoubtedly bring profit – especially since Kindle consumers typically start reading more after buying one.
“What we find is that when people buy a Kindle they read four times as much as they did before they bought the Kindle,” said Bezos in the interview. “But they don’t stop buying paper books. Kindle owners read four times as much, but they continue to buy both types of books.”
The Paperwhite, which is expected to begin shipping on October 25, offers up to eight weeks of battery life and will go on sale at the price of £109 for the WiFi version or £169 for the WiFi and 3G model.
To get the access to the Lending Library, consumers must sign up for an Amazon Prime membership, which costs £49 per year and gives users discounted delivery on products bought from the firm’s website, Digital Spy claims.
As The Daily Mail adds, Amazon’s offer includes rapid delivery, without any additional pay, of products from its warehouses.
“Although this adds to the firm’s shipping costs, evidence from the US suggests that subscribers end up spending more on its site and are less likely to compare prices with rival retailers,” the publication writes.
A spokesman for the company told reporters that she was not allowed to discuss the terms of the licenses signed with third-party publishers to allow it to lend out their electronic books. She added it’s up to authors to choose whether to take part or not.