Amazon, The Walmart of the web

The internet giant’s new tablet computer fits its strategy of developing big businesses by charging small prices

A COUPLE of years after it launched its website in 1995, Amazon was the subject of an unflattering report entitled “Amazon.Toast”. The pundit who penned it predicted that the fledgling online bookseller would soon be crushed by Barnes & Noble (B&N), a book-retailing behemoth which had just launched its own site.

Far from being crushed, Amazon is doing the crushing. Borders, a once-mighty book chain, was flattened this year. B&N looks like a frightened capybara running from a fierce Brazilian she-warrior. Amazon is now one of the web’s most successful e-tailers. Even Apple is feeling the heat.

On September 28th Jeff Bezos, Amazon’s boss, unveiled a tablet computer called the Kindle Fire. It will compete with gadgets such as B&N’s Nook Color tablet and Apple’s iPad. The new Amazon tablet, which has a somewhat smaller screen than the iPad and only offers Wi-Fi connectivity, is likely to be just the first salvo in a titanic battle.

Like Apple, Amazon boasts a huge collection of online content, including e-books, films and music. And like Apple, it lets people store their content in a computing “cloud” and retrieve it from almost anywhere. But the two firms part company when it comes to pricing. The Kindle Fire, which will be available from mid-November in America, will cost only $199. That is far less than the cheapest iPad, a Wi-Fi-only device which costs $499. B&N responded to the Kindle Fire by cutting the price of its Nook Color to $224. This week Amazon also rolled out a new range of Kindle e-readers, the cheapest of which costs just $79. “We are building premium products and offering them at non-premium prices,” beamed Mr Bezos.

Amazon’s decision to undercut its rivals is partly a tactic designed to disrupt the tablet market, which is still dominated by the iPad. Gartner, a research firm, reckons that Apple’s device will account for almost three-quarters of the 64m tablets it thinks will be sold worldwide this year. Amazon’s pricing strategy also reflects one of the firm’s core beliefs, which is that cheap stuff makes customers cheerful. Call it the Walmart of the web.

Low prices are not the only thing underpinning Amazon’s success. The company is technologically adept, and it has a knack of delighting customers with innovations such as its $79-a-year “Amazon Prime” shopping service in America, which offers members free, two-day shipping and other benefits. Such goodies have been crucial to its growth. But its ability to drive down the prices of everything from cameras to cloud computing gives it a colossal competitive advantage.