Amazon is growing on-demand services after reporting a 20% sales increase in 2015.
But will price be the real revolutionary factor among tablets?
The difference between the Mercedes-Benz C300 I used as a rental car earlier this year and the Honda Civic that is my daily drive appears to be huge at some levels. In reality, there was very little difference at all. In some ways the onset of worthy tablet competitors to the gold standard of tablets, Apple Inc.’s iPad, shares a similar analogy.
The Mercedes, although the smallest of the German brand’s sedans, still is larger than my Civic. It has more comfortable seats, a more powerful engine and niceties like power seats and automatic temperate control.
Next week, which happens to be the week before Thanksgiving, Barnes & Noble Inc. and Amazon.com Inc., each will release tablet computers with 7-inch screens, smaller than the iPad’s 9.7-inch screen. The Nook Tablet will sell for $249 and the Amazon’s Kindle Fire at $199, much less than the starting price of $499 for an iPad.
The internal specifications are different for each device, but that matters little to most consumers. It didn’t matter to me if the Mercedes transmission had six or five speeds. What would matter, if I were to make a purchase between a Mercedes and a Honda, is the price differential between the two. The price difference between my used Honda and a used Mercedes from the same year is about $4,500 in the Civic’s favor. That warrants foregoing some amenities to save that much money.
And, I suspect, many tablet buyers, once the Nook Tablet and Kindle Fire are available, will make similar decisions and opt for saving money. Some recent research suggests the $499 and higher pricing might be a little more than consumers want to spend. In a blog entry about the Nook Tablet, Forrester Research Inc. analyst Sarah Rotman Epps this week says a Forrester price sensitivity study conducted in September found that the optimal price for a tablet is $308. As she says, “…both B&N’s and Amazon’s tablets will look like a very good deal to consumers.”
Of course, consumers will have to answer for themselves if a cheaper tablet is just as good as the more expensive one. The money I saved by not buying a Mercedes is more than enough to pay for multiple years of insurance on the Honda and gets me where I want to go.