Target to Fire Amazon’s Kindle Line
For a lot of people, it never made a whole lot of sense that retailers such as Best Buy, RadioShack, Staples and Target would choose to sell rival Amazon’s Kindle e-reader and tablet devices. But they have had some success. Target, for example, reported during the most recent Christmas selling season that Kindle was its best-selling tablet on Black Friday.
Positive sales or not, Target apparently has decided that it’s paying too high a price contributing to the top and bottom lines of a company that it not only competes with in electronics, but every other product category it sells. A small but growing percentage of consumers, for example, are coming to its stores with mobile devices and checking Target’s prices against Amazon’s.
"Amazon has been one of the most disruptive forces," R.J. Hottovy, a Morningstar analyst, told the Star Tribune. "Store traffic and profitability have suffered at the mass merchants, particularly at big-box specialty retailers."
Mr. Hottovy said the recent deal between Target and Apple to test a store-within-the-store concept at 25 locations may be behind the decision to drop Amazon. With 1,700+ stores and growing, it seems unlikely that a small deal such as that would be, in and of itself, enough to make Target completely delist the Amazon line.
Another reason behind dropping the Kindle line could simply be declining sales. According to IDC, market share of the Kindle Fire fell about four percent in the first three months of this year after accounting for nearly 17 percent of tablet sales in the last quarter of 2011.
"The tablet market in general has been very seasonal," Bob O’Donnell, IDC’s program vice president, told Reuters. "At $199 it [Kindle] was much more of an impulse buy during the holidays. You don’t get much of an impulse buy during Q1."
Target spokesperson Molly Snyder said the decision to stop selling Kindle devices was part of the normal business process. In an email to Reuters, she wrote that the company "continually evaluates its product assortment to deliver the best quality and prices for our guests."
As a number of articles pointed out, both Apple and Barnes & Noble also compete with Target in several categories, although not nearly the number of categories as Amazon.
Discussion Questions
Discussion Questions: What do you think of Target’s decision to discontinue sales of Amazon’s Kindle devices? What will this mean for Amazon and Target?
I’m a little baffled by this decision, especially given the long history between the two companies — most of all when Amazon was spearheading Target’s e-commerce effort. And if dropping the Kindle is a way to punish a competitor, what’s next? Dropping the iPhone because people are using it inside Target for “showrooming”? (OK, obviously not.) To say that this decision is in the best interest of Target’s “guests” is disingenuous, considering the Kindle is the best-selling family of e-readers on the market.
It’s time for all retailers to wake up and look at how they are contributing to Amazon’s bottom line — at their own peril. I think it is a smart move masked as a “seasonal” adjustment. Right.
It’s not about the Kindle or the channel conflict. It’s the fact the Amazon is cherry picking categories at will.
I see little impact for Amazon or Target. What I do see is potential for a much stronger presence of other e-readers and tablets. Target will double down with another partner to replace the lost sales.
Count me among those who never understood why the heck Target started selling the Kindle in the first place. But then, Amazon was also hosting its web site until late last year.
I think it’s a logical step, especially given Target’s commitment to open Apple stores-within-a-store. Apple products have more cachet, and Target needs to re-establish its own cachet, I think. I believe the retailer has lost a step or two over the past year, Missoni collection notwithstanding, and creating space between Amazon and it just makes sense.
By the way, I think the “showrooming effect” is overrated. In days gone by, it was easy to blame a bad quarter on a technology implementation. Now we’ve found a wonderful new reason — “we got showroomed.”
If Target is discontinuing the Kindle line for competitive reason, they are simply fooling themselves. Whether or not they carry Kindle, consumers will shop Target and compare prices with Amazon.
Discontinuing the line because it is not meeting sales expectations makes sense.
I don’t believe that Kindle is a drive product for Target. Target needs to make that decision based on cost and margins, and how that product — just like razor blades — contribute to the overall customer experience.
If Kindle does not provide a benefit to the consumer and does not add to the bottom line, drop it. This same equation should be followed for all products depending on the life cycle of that product.
Even iPhone will have to compete on that basis eventually.
Target made a business decision. Target willfully chose to become the ‘showroom’ for Amazon and their Kindle. They were able to gain the sales from the holiday and impulse sales during the 4th quarter. Then folks went back to buying the Kindle online from Amazon. Surprise! Both Target and Amazon won for a select period of time. Time marches on and they part ways because it doesn’t make business sense for Target anymore. They can now shift their attention to Apple and leverage Apple’s brand that is uniquely suited for the ‘shop in shop’ concept being implemented at Target and other retailers.
Instead of fighting the reality of ‘showrooming’, retailers should embrace it passionately! Become the best showroom for your customers. After all, wasn’t that what retailing was meant to be?
Some decisions are just decisions — not necessarily monumental events. With Target’s firing of Amazon’s Kindle line, which was impelled by a state of mind which was destined not to last forever, Target has made another irrevocable decision in retailing passing parade.
As for Amazon and Target in the future, the world will continue to exist and they will both move forward.
The impact for both will likely be small, but is it the shot heard round the world? Will other retailers decide that supporting Amazon in any fashion is a not a good idea?
Selling the Kindle was sort of a pact with the devil for Target to begin with. Ultimately it would have little effect on their bottom line, could create enemies with a very emotional company in Cupertino, and justified the products/existence of a company that is mopping the floor with them online.
Additionally, there’s no added value selling opportunity for b&m retailers that sell a piece of hardware that has paid content bought elsewhere, unlike selling a Blue-Ray player and then the content disks again and again.
Given the market position/penetration of Kindle, I am having a hard time with the “it’s a product assortment decision.” Admittedly I don’t have their sales and market research numbers and they may see something I can’t.
If this is about the competitive issue as many suspect then it feels very short term to me. The bigger issues around what and how people are buying from Amazon and Target in an omni-channel world will not be materially effected by this one decision.
Could be that Kindle has a very low profit margin to Target and is not worth the effort. At least with Apple, Target can sell prepaid iTunes gift cards — has anybody seen prepaid Kindle gift cards?
I love it! It’s a sound business decision to go after a key competitor’s (unfair) competitive advantage. Amazon has shown it is out to destroy brick and mortar. Brick and mortar has the obligation to respond offensively by focusing on the store experience and defensively by eliminating a competitor’s Trojan horse. Kudos to Target’s senior management. I hope other brick and mortar retailers follow suit. Brick and mortar is not dead. It needs gutsy and offensive plays. Don’t turn the other cheek, get even!
The closed minded attitude of some U.S. retailers is quite frankly appalling. Come on, give me a break. Every day, retailers open their doors to sell goods and services, that is their role/responsibility and to offer choices. If a customer seeks selection, give it to them. A department store with the breadth of merchandise that Target has should not exclude products that their customers demand. This appears to be pure hubris and silly excuses — seriously — we evaluate products all the time and there is change periodically? No kidding. This is one big operation telling another we just don’t want to do business with you.
As I’ve written about earlier on this forum, one advantage that Amazon’s competitors have in the e-reader market is that shoppers can actually fool around with them in stores and learn to like them. Nook sits prominently in all those Barnes & Noble stores. iPads are sold very effectively in Apple stores, and a series of Android tablets and iPads occupy huge numbers of wireless stores across the nation. Even mobile Windows is gaining footprint as Microsoft rolls out stores modeled on Apple’s successful model.
Amazon’s approach has been to put Kindles into stores like Target and Staples. But in the meantime, we’ve also seen that Amazon is trying out its own bricks-and-mortar strategy, starting with the pilot store in Seattle. That makes good sense for Amazon, which can have more control over its own stores, can learn lessons from their performance which it can apply to the entire sales channel, and can lessen its dependence on resellers that can drop it exactly as Target just did.
While I don’t know what Target’s motivations were for dropping Kindle, if it does turn out to be for the strategic reasons suggested in this article, then I’m skeptical. Online commerce is a trend that will continue whether or not Amazon is the e-tailer in question, and Amazon will thrive whether or not it sells a few incremental Kindles through Target. It’s hard to imagine any meaningful change in Target’s bottom line that will come from this move, while the lost Kindle revenue will be real and possibly significant.
As Target’s spokesperson points out, ” … it’s part of the normal business process ….”
Retailers have to make decisions as to which merchandise items have to be discontinued due to fit in the store, seasonality issues, margins, service needs, etc.
Tablet sales will continue to soar in 2012 based on BIGinsight syndicated data — these mobile devices represent the “fourth screen”, joining TVs, computers, and cell phones. The Kindle is a “stocking-stuffer” from a pricing standpoint, for the folks that are buying it now. Based on the BIGinsight December Media Behaviors & Influence Study, the Target shopper is 30% more likely to have an iPad as opposed to a Kindle.
Bigger ticket, bigger margin, one is a product that is selling consistently throughout the year. Kudos to Target for having the moxie to know when to STOP, and then focus on growing and SUSTAINING the electronics business for profitability.
This is funny? Target is worried about becoming a showroom for Amazon, so they do away with a product that offers no ability to quickly connect with the internet, and at the same time reach agreement with Apple to feature devices that give the consumer instant access to Amazon or Google shopping. We all know that Target blocks cell phone reception in their stores (further agitates shoppers).
When retailers spend their time worrying about things that are obviously “beyond their control” they tend to take their eye off the things that make retail successful. Target is becoming more concerned with appearance than substance. Discontinuing Kindle will have no positive effect on Target and no negative effect on Amazon. Their embrace of Apple will have a positive effect on Amazon and a negative effect on Target.
This is like two countries withdrawing ambassadors. It is a prelude to hostile conflict.
There is only one reason that Target should be discontinuing Kindle … that is margin and movement. If any other reasons came in to play, they are shooting themselves in the foot.
Yesterday, if I wanted to buy a Kindle at a brick & mortar store, I could go to Target or Best Buy. Tomorrow, I can only get it at Best Buy. Sounds like Best Buy is going to be the winner here.
It’s usually not smart to promote a competitor, even if it means losing sales and disappointing some shoppers. Therefore, I cannot take issue with Target’s decision to stop selling Amazon’s Kindle. However, just eliminating their presence at Target does not address the increasingly and current unmet threat that Amazon represents to Target and other brick and mortar retailers.
Clearly, there is a need for innovative thinking about how Target and other retailers can embrace and expand their e-commerce initiatives and begin to apply the strength of their brand to pressure Amazon in the various categories they are continuing to chip away at.
Amazon loses a showroom at Target’s expense. Target loses little to nothing.
Makes sense. If Target only benefited from the initial sale of the device, then that’s a short-term gain with nothing down the road. Amazon’s big benefit doesn’t come from the device sale. That’s simply a razor to sell razor blades (content and subscription services). If Amazon was offering physical retailers a way to partner for long-term gains on sales (content) it might be a different story.
This is bad news from a company that needs more good news from a consumer perspective. But this may be a glimpse at how little the Target executives are able to do against the e-commerce wave. What a shame.
About time Target woke up to what most retailers (including Walmart) have realized for a while; who’s their #1 competitor? Amazon.
Why do them any favors? They certainly don’t seem to need any help.
It would seem to make a great deal of sense not to carry a competitor’s product, just as Safeway might not want to carry Kroger’s private label. The decision is a good one, even if the prompting was declining sales of the product.
Seems like a reasonable decision for Target, based on a desire to strengthen their own offerings while not making business any easier for a key competitor. There are plenty of examples where partnerships last as long as they are beneficial for both parties, and many where partnerships are terminated based on increasing competitive overlap. There are other options for readers, options that don’t create profit and share for a clear competitor.
Target, like almost every other retailer, is losing business to Amazon. A lot more than they are making selling Kindles, though perhaps selling Kindles wasn’t enough of a trip driver to compensate for the lost sales. While strategically this is a sound decision (why arm your enemy?), it’s not going to help them compete with Amazon.
Target strives to “surprise and delight” its guests by having them discover products they wouldn’t necessarily be expected to carry. So it made perfect sense that Target would offer the Kindle when it didn’t have other brick and mortar distribution.
Today the Kindle is ubiquitously available at retail (Best Buy, Office Max, etc…) and it’s the least strategic SKU that Target can carry (it contributes revenue directly to one of its largest competitors), so it makes sense that Target would re-allocate the space to more aspirational brands (like Apple).
Target’s ousting of Kindle marks the completion of its decoupling with Amazon. Its first move was when Target severed ties with Amazon’s online platform by taking its e-operations in-house. The Kindle move is insignificant to both parties; however, I find it interesting that Apple shop-in-shops keep getting thrown into the conversation. Target is a freak for exclusivity, yet Apple is far from that — there are the Best Buy shop-in-shops, of course, and a couple of days ago, I checked out another one-store Apple shop test…at Walmart.
Showrooming is real. This is a perfect example of the collision between being a supplier and a competitor. Technology is making the world more incestuous every day. Keep your friends close, and your enemies closer.
To me, this is really neither here or there. If Target dropped the Kindle because it was not carrying its weight, fine. If they dropped it as a way of firing a shot across Amazon’s bow, they were using a pea-shooter.
The larger issue is that to this point, nobody has come up with a viable retail response to “showrooming.” To this point, the new technology has been the trump card. Target has been a leader in trying to figure this all out, but there really aren’t any obvious answers.
There may be more to this story than Target merely pitching a fit, but at this point, it doesn’t look to be a whole lot more than that.