Wal-Mart Boots Out Amazon's Kindles

Essentially saying “we’ll show(room) them who’s boss around here,” Wal-Mart announced yesterday that it would no longer carry Amazon’s Kindle tablets alongside the Apple iPad, Barnes & Noble Nook, Samsung Galaxy, Google Nexus and similar devices on its shelves and Web pages.

Reuters’ Jessica Wohl broke the story, pointing out that the “timing of the decision to pull the plug … means that Wal-Mart will miss out on holiday season sales of the newest Kindle tablets, which range in price from $159 to $599.”

As the Los Angeles Times' Andrea Chang suggests, “the entirety” of Wal-Mart’s statement on the matter is vague enough to attract all sorts of colorful quips and theories:

“Recently, Wal-Mart Stores Inc. made a business decision to not carry current Amazon products beyond our purchase commitments and existing inventory.

Our customers trust us to provide a broad assortment of products at everyday low prices, and we approach each merchandising decision through this lens.

We will continue to offer our customers a broad assortment of tablets, e-readers and accessories at a variety of great price points. This decision is consistent with our overall merchandising strategy.”

“The Kindle Fire is the Trojan horse,” Jellybooks CEO Andrew Rhomberg tells the New York Times Stephanie Clifford and Julie Bosman. “It’s a shopping platform that covers so many more categories than e-books. It affects Wal-Mart in a different way than the early Kindles and e-readers did.”

Forrester Research analyst Sucharita Mulpuru used the same hollow-equine analogy in speaking to Reuters’ Wohl, adding that Wal-Mart “should have made this decision to not carry the Kindle a long time ago.”

That’s because retailers such as Wal-Mart and Target, which ushered Amazon through its exit doors in May, have a lot to lose as “showrooming” -- checking out a product at the big-box, then buying it online after comparison shopping -- catches on. In some states, consumers are able to avoid paying sales taxes by buying online, too (at least for now).

"Wal-Mart and other retailers don't want to facilitate Amazon in any way," Forrester’s Brian Walker tells The Wall Street Journal’s Ann Zimmerman and Greg Bensinger. "Wal-Mart probably doesn't sell many Kindle units, but they don't want to become a showroom for Amazon, who they are fighting tooth and nail with on almost all their other products."

Amazon added fossil fuel to the competitive fires when it released a Price Check app for iOS and Android. Gawker went so far as to tag it as “Evil,” which it may indeed be in an endearing mad-scientist sort of way, when Amazon added an extra 5% off (up to $5) to anyone who used it last December.

“When Wal-Mart sells a Kindle, they’re effectively putting in their customers’ laps a cash register for competitors,” Caris & Co analyst Scott Tilghman tells Bloomberg Businessweek’s Chris Burritt and Douglas MacMillan.

Other analysts speculated that margins on the Amazon products -- which “are believed to be thinner than those of other gadget makers,” as Wohl writes -- had something to do with Wal-Mart’s decision. And that’s fine by Amazon, for whom “it’s much more profitable to sell through their direct channel, which is the majority of that business anyway,” Forrester’s Sarah Rotman tells Burritt and MacMillan.

A source tells the Journal’s Zimmerman and Bensinger that Wal-Mart “also was unhappy with Amazon's decision to offer a cheaper Kindle Fire product that contained advertising without disclosing that consumers could remove the ads after paying a $15 fee.” (Amazon caved in to consumer pressure on that decision, as Ars Technica’s Jon Brodkin reported.)

Ars Technica’s Casey Johnson offers a more offbeat -- but plausible -– observation. “Part of the Kindle Fire experience is that the device is pre-loaded with the owner's Amazon account, so that it's ready to use out of the box,” he writes. “This is a difficult process to replicate elegantly in-store -- that is, without an employee ripping the device out of the box and hunkering down with a USB cable to get it working.”

And SlashGear's Cory Gunther goes so far as to “wonder if” Wal-Mart “is looking to get into hardware themselves,” offering Best Buy's Dynex and Insignia brands as examples of retailers who have.

Speaking of Best Buy, it tells The Wall Street Journal that it will continue to sell the Kindles, as will Staples and Radio Shack.

“Now Amazon must figure out how many of its other corporate frenemies are mulling defections,” blogs Wired’s Ryan Tate, pointing out that retail isn’t the only sector where the online retailer is potentially competing with its partners in commerce. In publishing, it both sells books and publishes them. In movies, it hosts streaming sites such as Netflix on its tablets while running a service of its own out of Amazon Prime.

“Amazon may need to start applying the same special handling to certain partners as it does to certain packages,” Tate concludes. “-– at least if it wants to avoid further breakages.”

On the other hand, you might conclude that Amazon has been doing just fine by creating its own breaks, as Bloomberg Businessweek’s David Welch does here.

Tags: retail, tablet
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1 comment about "Wal-Mart Boots Out Amazon's Kindles".
  1. Doug Garnett from Atomic Direct , September 21, 2012 at 10:19 a.m.
    I never figured out why tech has felt that they should not only compete with traditional channels, but poke the tiger in the eye. Amazon has made a huge strategic mistake publicizing showrooming (which studies show isn't as common as our panic would suggest). It's perhaps not accidental that the company who best works with traditional channels (Apple) is the largest valued company in the world.