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Do they seek low-margin businesses? My take was that they looked for industries where they could comfortably price lower than anybody else. Case in point: tablets. Traditionally a fairly high margin business (on a unit basis), and Amazon comes in at a price that is only feasible because of the Prime play.



I think it's that they go after low margin industries in situations where they know that they can use their scale to undercut the existing businesses. Since the margins are so low the existing businesses do not have many options to compete or different ways to add value. Combine this with the fact that Amazon operates on a long horizon and is willing to take losses on certain investments as they scale over time and eventually dominate that market by pushing the margins even lower.

Then there's other things like Prime play which may justify them going after low margins in the tablet industry, but there's other good android tablets in that price range.

I think what you're thinking about w/ prime and tablets is their general approach with complimentary products.

For example they're developing original content. This isn't just to profit off content, it's also from the realization that physical books and movies are becoming less imporant and that digital copies are becoming more and more prevalent. This lowers the cost of the goods & reduces the amount Amazon earns by charging a % of the sales. So it makes sense for Amazon to just outright own and distrubute the content too.

But this also compliments other Amazon businesses. If people are watching TV through Amazon then Amazon has more opportunities to advertise their products to individuals. I doubt Amazon plans on loosing money on original content, so it's not a loss leader, but the fact that it boosts the value of their tablets, prime service (which significantly increases the amount people spend at Amazon per year), advertising etc. means that they are willing to accept much lower margins on content production than traditional studios and perhaps even Netflix.

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