Mass merchants abandon Kindle Fire - can it survive?
By Chantal Tode
September 24, 2012
Will Amazon try to repeat Kindle Fire success in smartphones?
The number of retail outlets where consumers can see and touch Amazon’s Kindle Fire is dwindling, which could dampen sales this holiday season.
Walmart is the latest mass merchant to drop Amazon’s Kindle Fire tablet as these bricks-and-mortar retailers increasingly view the ecommerce giant as a competitive threat. With Target also making a similar decision several months ago, Amazon has lost valuable store real estate but this alone may not hurt the Kindle Fire’s chances of repeating its success last year.
“It is a battle of online versus bricks-and-mortar,” said Peter King, London-based director at Strategy Analytics. “Amazon has designed the Kindle Fire as an electronic point-of-sale device, so in theory the consumer could use the Fire inside a Walmart store to provide options via online services at lower prices.
“The other reason I suspect this is happening is the retail margin,” he said. “I cannot imagine Amazon is being too generous given the small difference between cost and retail prices.
“This isn’t a big blow to Amazon because it will make more money per unit sold, and can better control the sales and marketing campaigns.”
The showrooming factor
Walmart said last week that it will no longer sell Amazon’s Kindle ereaders and tablets.
Ostensibly, the reason Walmart and Target do not want to carry the Kindle Fire is because the device can be used inside a store to look for lower prices elsewhere on items found on the shelves. The practice of showrooming, as this activity is called, is a growing concern for retailers.
However, according to research conducted by ABI Research for the Interactive Advertising Bureau, consumers who use tablets and smartphones in the store are overwhelmingly doing so to get more information about a product they are interested in.
The research showed that these shoppers did not typically change their buying habit as a result of doing online research in stores. In other words, shoppers who typically make a purchase in-store still did so.
“It is a bit of a surprise,” said Jeff Orr, senior practice director for mobile devices at ABI Research, Oyster Bay, NY. “I think it is being done for the wrong reasons.
“Both Target and Walmart have some belief that companies such as Amazon are going to take away their opportunities for retail sales by providing solutions that could ultimately compete with their retail offering,” he said.
“This is an early and broad response to Amazon as a potential competitor."
While shoppers will have fewer opportunities to pick up and try a Kindle Fire during the upcoming holiday shopping season, the devices will still be available at Best Buy and RadioShack stores.
“It probably won’t hurt sales,” Mr. Orr said. “The Kindle Fire will still be at electronics stores Best Buy and RadioShack.
“If they were to not have a retail presence at all, I would feel that there is going to be an impact,” he said. “There is a pretty sizable number of locations where consumers won’t have access to seeing the device – certainly Best Buy and RadioShack can help make that up.”
The advantage to having a retail presence is being able to try something before making a purchase. As such, there may be some lost opportunity coming from consumers who might have switched to the Kindle Fire after seeing the device in person.
However, the lack of a presence at Target and Walmart will not hurt the Kindle Fire for a couple of reasons, per Mr. Orr. First, the audience for the Kindle Fire is likely to be consumers who are already familiar with the tablet category and what the devices can do.
Additionally, the price point for the Kindle Fire, which is around $199 – is low enough that it is an impulse buy for some.
Staying the course
The moves also mean that Walmart and Target could miss out on important sales if customers are determined to purchase a Kindle Fire.
The Kindle Fire was a surprise success story during the holiday season last year and Amazon has recently introduced new versions that have gotten some good reviews.
These retailers are carrying a variety of other tablets in the increasingly crowded category, including the iPad, which still dominates tablet sales.
There are also new entries from Google, Microsoft and others.
What Amazon needs to do to insure the continued success of the Kindle Fire is to focus on delivering a strong content experience.
Amazon also needs to focus on quickly building the Kindle Fire’s presence outside of the United States.
“Amazon has to provide clear competitive advantage over the Google Nexus 7 and it has to widen its distribution to as many countries as possible, as quickly as possible,” Strategy Analytics’ Mr. King said.
“Keeping prices as low as possible is paramount for Amazon; in our very recent US Tablet consumer and intender survey, we found that the pricing expectations for the Amazon Kindle Fire were the lowest of the four platforms, (Apple, Microsoft, Google and Amazon) despite the content store being stated to be one of the best,” he said.
Chantal Tode is associate editor on Mobile Marketer, New York
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