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Kindle Fire?s light dims as sales, distribution troubles arise

Kindle Fire's share of the tablet market plummeted to just more than four percent during the first quarter, down significantly from the 16.8 percent share it posted in the fourth quarter, according to IDC. The news follows Target?s announcement last week that it will stop carrying the Kindle Fire. 

The Kindle Fire lit up the tablet market when it arrived on the scene last fall as consumers quickly embraced the low-cost device designed for consuming content from Amazon?s library. The double whammy of dropping sales and the push back from retailers who are not pleased with some of Amazon?s strategies suggest the Kindle Fire?s early success may be hard to maintain.

?I think the whole story about the Fire was that it was the first $200 tablet that was pretty good and got people excited as a holiday gift,? said Carl Howe, vice president of consumer research at Yankee Group, Boston.

?To Amazon?s credit, they did create a tablet that had a unique experience and got a lot of interest with four million in sales,? he said. ?That?s not iPad size but it is the biggest number that  anyone other than Apple has posted.

?The problem is that low price is not very sticky for consumers - it doesn?t drive to store and Amazon is faced to ask itself what need is it filling, do people want it and does it have good distribution. That is probably where things have not gone as well.?

Intent to buy
Not only have sales dropped off, but it appears that the Kindle Fire is not driving as much excitement among consumers as it did a few months ago.

A Yankee Group survey of consumers found that the intent to buy Kindle Fire is dropping, with six percent of respondents saying they plan to buy one in the next six months, down from 14 percent in Oct. 2011. The report also found that seven percent of respondents currently own a Kindle Fire.

?A lot of the appetite for buying the Fire did drop off,? Mr. Howe said. ?The intent to buy versus the installed base in on par with Apple ? Kindle Fire is not going to raise its market share that way.?

While not too long ago, it seemed like Kindle Fire had shored up the No. 2 spot in the tablet market, this is now in question, with IDC expecting the battle for the No. 2 and three spots to be fierce the rest of this year.

Apple continues to dominate the tablet market, with its first quarter performance buoyed by the introduction of a new tablet, the move to position the iPad as an all-purpose tablet and the decision to keep a lower-priced iPad 2 in the market. However, Samsung benefitted from Amazon?s loss and regained the number two position in tablets.

While the tablet market continues to grow and tablet shipments in the first quarter of 2012 were up 120 percent from a year ago, they were down more than expected from the previous quarter.

IDC had expected a 34 percent slowdown in the first quarter but the reality was more like a 38.4 percent drop. Worldwide media tablet shipments totaled 17.4  million in the first quarter, according to the research firm.

Google?s entry
In the months since the Kindle Fire came on the market, others have copied its low-priced strategy, creating more competition for Amazon?s tablet.

The competitive atmosphere will continue into the second half of the year as Android manufacturers come out with new devices. For example, Google is expected to enter the market with an inexpensive, co-branded ASUS tablet designed to compete with the Kindle Fire.

IDC expects Amazon to introduce a new, larger screen tablet at an aggressive price point.

One of the challenges facing the Kindle Fire is on the retail front, since it is an Amazon-branded product and many retailers are not happy with the online giant?s practices.

For example, Target said last week that it will stop stocking the Kindle Fire. At least part of what may have driven the decision for Target is that Amazon offers a price comparison app that shoppers can use while in a Target to find lower-priced items and order them.

?This is where those $5 incentives offered by Amazon to buy something from it come into play and Target deciding that that is not something that it has to support,? Mr. Howe.

?Target probably looked at its sales and said what do we lose by discontinuing the Kindle Fire and what do we lose by not carrying books,? he said. ?And, it decided that the latter scenario was the worse one.?
Other retailers such as Staples that also carry the Kindle Fire could possibly make a similar decision.

?I don?t think this is good for Amazon but I also don?t think it has a big effect either,? Mr. Howe said. ?Most Kindle Fires are sold through Amazon.?

For marketers who are thinking about releasing apps for Android tablets, the Kindle Fire is still a leader.

However, it is not clear yet what the Kindle Fire consumer?s appetite is for apps since Amazon does not release these numbers.

According to Yankee Group?s estimates, the Kindle ereader also did not fare well during the first quarter of 2011, possibly reflecting waning interest in ereaders.

?Our view is that over the next four years, consumers are largely going to shift towards tablets,? Mr. Howe said.