Amazon Slashes Kindle Price, Adds Free 2-Hour Delivery

By Douglas A. McIntyre Updated Jan 13, 10:59AM EST · Published Apr 9, 9:10AM EDT

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Business school professors have several theories about why companies slash product or service prices and offer incentives to draw customers. Experts have to be scratching their heads as Amazon.com Inc. (NASDAQ: AMZN) has slashed the prices by as much as $50 on some Kindle e-readers, and offered two-hour delivery to boot.

The offer has strings attached. It is only available to Prime members (Amazon’s $99 a year service, which includes its streaming media service and levels of free delivery, but rarely for the same day). And only one to a customer. And “while supplies last.”

The Kindle offer is a Trojan horse. Its primary goal appears to be a means to draw customers to other products that can also be had with two-hour free delivery. To get this package, customers have to be members of Prime Now. The offer only applies in cities where Amazon already has a two-hour delivery. And, obviously, people have to sign up for Prime.
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Outsiders have speculated that Amazon does not make money on either Prime or the Kindle. This theory presumes that Prime “tethers” customers to Amazon, and that many of the Prime members will shop for everything from eggs to lingerie. Amazon still has to fend off competition from brick-and-mortar stores and other streaming media services, particularly from Apple Inc. (NASDAQ: AAPL) and Netflix Inc. (NASDAQ: NFLX).

Is a Kindle discount a way for Amazon to make money, or another of the plans by CEO and founder Jeff Bezos to gain and hold customers? Bezos is notorious for losing money on programs that he thinks will drive profits later. It is Wall Street’s biggest gamble by one of the most widely admired CEOs. None of those things mean the Kindle promotion will work. It is likely nothing more than a calculated gamble.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.