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It's not a secret that Amazon.com (NASDAQ:AMZN) has long been touting the Kindles (Fire, Touch) as their best selling products. Indeed, if you checked Amazon.com's best sellers' list, these routinely topped the "Electronics" section, as seen in the printscreen below - which I took 2 weeks ago:

(click to enlarge)

However, in the last few days the Kindle Touch has gone out of stock for a while, probably because Amazon.com has getting rid of the final stock, since the company's presentation on September 6 will probably include replacements not just for the Kindle Fire, but also for the eReader lineup, namely with the inclusion of lighting capacity similar to Barnes & Noble's (NYSE:BKS) Nook with GlowLight.

This destocking has led to a rare event today: the Kindle Touch has dropped from the 3rd place spot on the best sellers' list, as seen below.

(click to enlarge)

Now, AMZN's ordering of these lists follows an unknown formula which overweighs recent sales but does take into account the product's sales history over a longer timeframe. That's the reason why the Kindle touch managed to go out of stock 2 weeks ago and not drop right away. But still, this event does let us have a rough idea of what it takes to get in the top three of this list …

… and that idea is pretty amazing. It's amazing, because we know how many of Apple's (NASDAQ:AAPL) TVs sold last quarter, so we have a rough idea of the rhythm at which this product sells. And that rhythm is quite slow. Apple sold just 1.3 million of these devices last quarter! Now, even if we plug in an outrageous share for Amazon.com, like 20% of all Apple TVs sold, which isn't realistic at all, we still come to a very low number - like 260k Apple TVs sold in a quarter by Amazon!

Yet, here we are, with a product that probably sold no more than 260k units, and still shows up as the 3rd best seller on Amazon.com's best seller list! This also shows why in spite of there being reasons to believe the Kindle fire and the Kindle eReaders saw plunging sales, they still show up as Amazon.com's best sellers. This happens, because it takes just a few hundred thousand units to lead those lists.

Finally, this event highlights the mismanagement I spoke about previously. Although Amazon.com can increase the SKUs it carries exponentially, it's getting a lot of its revenue expansion not from selling much more of the same products, but by selling many more different products. This has negative margin implications, from reduced warehouse efficiency and because Amazon.com can't lean on suppliers and get much better terms when it's not selling their wares in great quantities, like it did when focusing just on books (where indeed, it leaned heavily on suppliers).

Conclusion

The Kindle Touch going out of stock and dropping out of the top three best sellers offered us a rare glimpse into what it takes to get into the top three Amazon.com best seller list. This glimpse shows that a mere few hundred thousand units is enough, and again reinforces the notion that Amazon.com is facing structural challenges to its profitability, due to its revenue growth coming more from an expansion of the wares it carries, than from the massive selling of core products.

Source: A Rare Glimpse Into What It Takes To Be An Amazon.com Best Seller