Amazon to sell incoming tablets as loss leader

Insider sources quoted by PC Mag are suggesting that online flogger of books Amazon will sell its forthcoming iPad opponent at a loss.

Rumour has it that Amazon boss Jeff Bezos knows his firm's offering can't compete on an even playing field with Apple, as the iPad has a two-year year head start on the competition as well as a mature operating system and an app store crammed full of useful stuff.

Rather than trying to build the device down to a price, Amazon will price the ebook-centric tablet below the cost of its components, using the model used by razor blade and printer manufacturers. Both of these industries sell their hardware at less than they cost to make in the safe knowledge that punters will make up the shortfall buying expansive consumables.

In Amazon's case, its consumables are books and other media which will be sold through the Amazon web site and in-app purchases.

The article's author posits that, using information gleaned from Taiwanese component manufacturers, the Amazon tablet will have a BOM or around $300 and sell for fifty bucks less than that, a shortfall which could easily be made up with the sale of three or four blockbuster books or 50 MP3 tracks at today's prices.

It's not a bad model for a company which already has one of the most trusted and long-standing commercial web sites on the planet, not to mention 200 million registered credit-card-holding customers.

It might not be enough to enable Amazon to 'own' the Android device market as the yarn suggests, but it could make a healthy dent in Apple's virtual monopoly in the tablet space.