Walmart Also Fires the Kindle

Discussion
Sep 21, 2012

Following a similar move by Target in the spring, Walmart revealed Thursday that it will stop selling Amazon’s Kindle tablet line.

"We have recently made the business decision to not carry Amazon tablets and e-readers beyond our existing inventory and purchase commitments," Walmart said in a memo sent to store managers Wednesday, according to Reuters. "This includes all Amazon Kindle models current and recently announced."

A statement from Walmart’s public relations stated, "Our customers trust us to provide a broad assortment of products at everyday low prices, and we approach every merchandising decision through this lens. We will continue to offer our customers a broad assortment of tablets, eReaders and accessories at a variety of great price points. This decision is consistent with our overall merchandising strategy."

Walmart’s lineup will continue to include Apple’s iPads, Barnes & Noble’s Nook, Google’s Nexus 7, Samsung’s Galaxy Tab and other tablets and eReaders. Amazon declined to comment.

With no further explanation, three theories — all intertwined — emerged as to why Walmart dropped the line:

1. Skimpy margins: Amazon can sell its Kindle lineup apparently at loss-leader margins because it ultimately makes more money from people purchasing e-books with the Kindle eReader or merchandise through its Kindle Fire tablets. Walmart also competed directly on the item with Amazon.com. A pricier item such as the iPad was presumed to offer more margin room, although some observers said all technology providers drive hard bargains.

2. Kindle competition: Last month, a new line of faster and sleeker Kindle e-readers and tablets was unveiled with higher-end models offering easy access to Amazon’s online store. While other 7-inch tablets also support anywhere-online buying, a line may have been crossed. Scott Tilghman, an analyst at Caris & Co., told Bloomberg, "When Wal-Mart sells a Kindle, they’re effectively putting in their customers’ laps a cash register for competitors."

3. Amazon competition: The sexiest theory is that Amazon’s threat as a competitor finally outweighed carrying the Kindle, which included its popular eReader line. Books, CDs and videos are no longer the only categories Amazon competes in. Amazon "is a little bit of a Trojan horse" when the Kindle is sold in other stores, Sucharita Mulpuru, retail analyst at Forrester Research, told Reuters. "They should have made this decision to not carry the Kindle a long time ago."

For Amazon, the impact was said to be moderate given that most Kindles are sold at Amazon.com. But with Walmart joining Target in discontinuing the Kindle, Amazon may be more inclined to pursue its rumoured opening of its own stores to showcase Kindles.

Why do you think Walmart pulled the Kindle? Was it the right move? Do you see competitive conflicts with any other e-readers sold by Walmart?

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15 Comments on "Walmart Also Fires the Kindle"

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Dick Seesel
BrainTrust

I have the same reaction as I did a few months ago when Target announced its move: This has everything to do with e-commerce competition from Amazon, and very little to do with carrying the right merchandise. There is no doubt that the Kindle family of readers and tablets is the share leader in the category, so it sends a mixed message for the two largest discounters to drop the product. It’s all about the big box stores feeling Amazon breathing down their necks.

Peter Fader
BrainTrust

This might or might not be a good move, but the reasons mentioned above don’t really get at the heart of the matter. Walmart’s profitability from selling the Kindle, per se, is largely irrelevant; the key is the profitability of the customers who would consider buying it. Suppose Kindle fans are relatively high-value consumers — then who cares if the Kindle enables them to buy stuff through Amazon? They’re probably buying lots of stuff through Walmart too. Walmart shouldn’t want to chase those customers away.

The problem with Walmart is that they know relatively little about customer profitability compared to many of their retail rivals. They have deep pockets that give them a buffer when they make these kinds of naive product-centric decisions. But that’s not a healthy long-term strategy….

Max Goldberg
BrainTrust

Walmart pulled the Kindle because Amazon is consistently beating them on price, selection and service. Pulling the Kindle may hurt Amazon a little in the short term, but it will not address the 3 issues stated above, which is why Amazon is so successful.

Liz Crawford
BrainTrust

Walmart is making a smart bet — that consumers are not interested in lugging around multiple devices. One should suffice. Increasingly the question will be — which device does the best job of doing it all? Walmart made its bet.

Ken Lonyai
BrainTrust

It’s all speculation as to why Walmart dropped the Kindle, but it was a good move to make. The Kindle exists to sell digital content, not to be a profit center of its own. Any retailer that sells it simply has what are probably thin margins on the hardware and nothing else. In fact, they help grow the Amazon content ecosystem in the process. It’s a different story with other tablets since the majority of content for them is 3rd party. So when there’s very contentious competition on every other front and more to gain for Amazon than Walmart, I wonder why they ever sold the item.

Fabien Tiburce
Guest
Fabien Tiburce
4 years 9 months ago

Once upon a time, a certain horse didn’t work out so well for the city of Troy. I suspect The Kindle didn’t work out so well for Walmart either.

Ben Ball
BrainTrust

On the one hand this is simple — would Walmart carry a Target Tablet or the new Toys “R” Us kids tablet? Of course not, so why carry Amazon’s products?

But the issue is really more analogous to U.S. and China trade relations. Are we better off in a free market trading situation or is protectionism the way to go? Is Walmart better off denying Amazon some brick & mortar sales? Or by being the most complete brick & mortar alternative to Amazon they can be?

Tough question.

Dan Belling
Guest
Dan Belling
4 years 9 months ago

I think that you might find this move may add more momentum to online ordering. These two giants are protecting margins, but will soon realize that some people will find it on Amazon and “learn” that they actually enjoy the online experience — and continue to “shop-away” from brick & mortar.

Mark Burr
Guest
4 years 9 months ago
As I said about the Target decision, Amazon loses a showroom at Walmart’s expense. We have both the original Kindle, the Kindle Fire, as well as another brand tablet in our household, all of which are great products at a significantly lower price point than an iPad. One was purchased at Target, one was purchased through Amazon, the other brand purchased at Costco. Notice something there? Amazon got one of three, but in the end essentially two out of three. More thought, a little perspective, and some more thought leads me to believe this was neither a good decision for Target or Walmart. Both lost a reason for the customer to come through the doors. A very high quality product at a price point is of value to consumers. It seems to me that is both of these retailer’s intention. That is, to deliver high quality, good value products to their consumer. The margin discussions are mute. Amazon isn’t making margin on them either. The advantage both Target and Walmart had was an entry point. Customers that want them will get them from Amazon. In the meantime, both of these retailers made emotional decisions — not so much a good… Read more »
Bill Emerson
Guest
Bill Emerson
4 years 9 months ago

I’ve had conversations with senior managers from several major retailers. They each, with varying degrees of passion, talk about how “Bezos is trying to take over the world.” There is no competition that concerns them as much. I go with theory number 3.

Brian Kilcourse
Guest
Brian Kilcourse
4 years 9 months ago

Walmart is protecting their market position for key categories. Why would a retailer help the competition steal its business? If there is a message in this (beyond the obvious), it’s that Amazon has been elevated from a nuisance to a threat.

Craig Sundstrom
Guest

Scanner’s anecdote is interesting — they usually are — because (1) it emphasizes the emotional element (“we’re not going to carry THEIR” product) that is often — or usually — at work; and (2) the carrying of the dominant retailer’s product(s) by competitors led not to further dominance, but rather to its (near) demise (or at least that’s one way of looking at it). I wonder if anyone here thinks other retailers carrying Kindle actually hurts Amazon…probably not if it truly serves as a stealth shopping basket.

Robert DiPietro
BrainTrust

Walmart pulled the Kindle because it’s not worth helping someone who is competing in so many other categories. PLUS — they carry Apple and other e-readers

Mark Price
BrainTrust

Walmart to pull the Kindle smacks of the type of reactionary aggression prevalent in many retailers, particularly the large ones. Realistically, every cell phone and every tablet is a way for consumers to be able to shop online while standing in a Walmart store. To kick out the Kindle in response to a problem that is far more global simply makes no business sense at all.

Walmart must develop an integrated experience between on and offline in order to address the show room issue that faces many retailers today in technology and other consumables.

Amazon is not the enemy; rather, the challenge stems from the broad array of online offerings that are available to consumers at the touch of a button while they are shopping in-store. To blame the entire issue on Amazon focuses the problem externally and fails to realize that the key issues revolve around customer experience with the retailer both on and offline.

Mike B
Guest
Mike B
4 years 8 months ago

This is a step back because Walmart has been trying harder to grow the electronics and communication category. Customers will get what they want. The Kindle is a very popular item, many people have them, many others want one. If Walmart cannot take care of them, they will go get the Kindle where it is sold.

So what if it is a competitor’s product? So what if there is little to no margin? As others point out, if it brings the customer into the store, they will probably buy something else.

Clearly it was an emotional move for both chains to do this.

I have seen Kindles at Fred Meyer (a store that curiously sells Target gift cards). Anyone want to comment if Meijer is carrying them?

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