Debrief: Apple vs. Amazon

A couple of reasons why I chose to write on ReadWriteWeb’s article “The Difference Between Apple and Amazon in One Chart”: As an economics major, my ears automatically perk up when I hear the word “profit” so I knew I had to delve deeper into the subject. Also as a heavily invested consumer for both Amazon and Apple, I was curious to know what kind similarities the author draws between Amazon and Apple as the comparison did not seem so obvious to me.

Click here to read the article

This graph sums up the entire article: that Apple makes a lot of profit and Amazon does not. And as you can see, the differences in the profit between the two is drastic: Apple’s profit has steadily risen over the past couple of years while Amazon’s growth is stagnant. The article summarizes the key differences in the two companies’ profit strategy by analyzing the sales of their devices such as e-readers, tablets, mp3 players, etc. Amazon’s strategy is to “sell now, profit later” as its mark-up on its devices is relatively low.

As Amazon’s CEO Jeff Bezos said so humbly:

“”We want to make money when people use our devices, not when they buy our devices,” Bezos said. “If someone buys one of our devices and puts it in a desk drawer and never uses it, we don’t deserve to make any money.”

Apple’s model is quite the opposite where the devices are the revenue drivers.

For example, Amazon’s Kindle Fire HD (8.9 in with 16 GB of storage) will sell for $299 while Apple’s iPad (the lowest end version of 16 GB Wi-Fi only model) for a hefty $499. With a $200 price difference in the two tablets, it is highly visible that Apple racks ups its profits in the sale of the iPad.

Kindle Fire HD $299; iPad $499

The conclusion of the article is that no one strategy is better, they are just different. I’d like to add that not only are there strategies different, Amazon and Apple are two very different companies. Sure, they both sell their own kinds of gadgets and they both probably fall in the top-10 B2C e-commerce sites, but a typical consumer views Apple as a brand and Amazon as an e-commerce site. Apple prides itself in its innovation and it also captures an international consumer base while Amazon relies good customer service and its ability to offer a variety of products. Amazon’s global presence also isn’t quite up to par with Apple’s.

Basically, I’m not expecting Apple to ship me my textbook shipped within in two days, and I’m not asking Amazon to present me with..well the iPhone 5. In order to compare the profits of Amazon and Apple, we cannot only scrutinize the sales of their computer devices but rather we also need to analyze the innate nature of the company and other factors that drive revenue.

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