Is Amazon Kindle Really a Successful Product?

Is Amazon Kindle really a successful product? Given all of the prime real estate that Amazon has given it on their homepage, I'm not sure that Kindles sales are all that impressive. Amazon.com is currently the 33rd most popular website according to Alexa, and Kindle has been parked on the home page for 3 months. Moreover, they've given Kindle its own sections under the "Electronics & Computers," "Books" and "Digital Downloads" tabs and it seems like they merchandise it on many book web pages as well.

What product wouldn't sell well with this kind of placement?

Great Amazon Kindle Conversation

Just a heads up that there was a great Amazon Kindle conversation sparked by Tim O'Reilly on the Radar blog.   The original post is quite interesting and so are the comments from readers, most of which Tim responded to.

Amazon Kindle Magnifies the The Long Tail

One of the reasons that Chris Anderson suggests for Amazon's success was that it's online sales model tapped into the long tail of book demand because it separated the limitations of shelf space from inventory and reduced transaction costs (i.e. sales processes).

In a retail setting floor space is expensive and inventory is inherently limited because shoppers will only buy books that are on display. Furthermore, a customer has to physically walk into a store to make a purchase and up-selling opportunities are narrowly limited to shelf takers and employee recommendations, which touch relatively few customers.

In contrast, Amazon.com has nearly infinite shelf space and dramatically lower cost of inventory because their books are stored in warehouses rather than expensive retail locations. The transaction costs of browsing the web are also much lower than getting up off the couch to walk into a store. Lastly, up-selling mechanisms touch many customers through surprisingly popular recommendation algorithms.

Yet, Kindle takes this to an even further extreme by removing physical media from the process, which virtually eliminates all inventory storage costs and dramatically reduces transaction costs associated with delivery & wait times, which then increases power of impulse buying and the effectiveness of up-selling.

	Book Store	Amazon.com	Kindle
Cost of Inventory	Printing + Retail	Printing + Warehouse	Electronic
Cost of Transaction	In Person	Web + Shipping	Web

Given this perspective, I think Amazon is making a mistake by keeping the price of Kindle high and the format proprietary. An inexpensive and open electronic book reader would reach an wider audience and unlock more of the long tail, which Amazon is positioned to be the primary beneficiary of. Others, like Jason Epstein, offer some insight into why the costs of Kindle might be so high, but I always contend that pricing should be based on value, not cost and I suspect that his cost assumptions might a little bit high.