WalMart comes to its senses and stops selling Kindles

Posted on September 20, 2012 by switch11

Reuters reports that WalMart will stop selling Kindles – both Kindle Fire and Kindle will no longer be sold at WalMart.

It’s the second big retailer after Target to do so. It’s interesting that all these companies are coming to their senses. Here’s what WalMart had to say -

“We have recently made the business decision to not carry Amazon tablets and eReaders beyond our existing inventory and purchase commitments,” Wal-Mart said in a memo sent to store managers on Wednesday. “This includes all Amazon Kindle models current and recently announced.”

An analyst thinks the main reason is that Amazon is considered a competitor -

“I think part of it could be margin, though the bigger point is that Wal-Mart and Target view Amazon as a competitor,” Tilghman said.

Yeah, suddenly they wake up and realize Amazon is going to destroy them if they don’t wisen up fast.

Retailers selling mini Amazon.com Stores is Madness

When WalMart started selling Kindles it seemed, to me, the most insane decision ever. Here’s part of what I wrote (the link has the entire post) -

It’s absolutely inexplicable to me that stores like Best Buy and Target and WalMart would sell Kindles and accelerate their own demise.

Do they not realize that Kindle Fire is a direct connection to Amazon.com? That Kindle and Special Offers will end up eroding the sales of the retail stores?

She (Best Buy spokeslady) might as well say -

We are getting tired of selling all these electronics. So we thought we should let Amazon get a direct connection to our customers so that our customers start buying electronics from Amazon.com instead.

This is a standard standard pattern. Fool the existing market leaders into giving you a piggyback ride. Then turn on them when you have enough reach/control/power.

Technology Companies ALWAYS destroy the Incumbents – Right after promising them Salvation

It’s an endless list of new technology companies that destroy existing markets -

  1. Newspapers put their faith in Google. How’s that working out? What they really should have done is banned Google from carrying any of their content.
  2. Borders let Amazon run its online store. Smart move Borders.
  3. Book Publishers are trusting Google and Amazon and B&N. They are going to get skinned alive. Now that the Agency Model has been ruled illegal it’s going to happen even quicker.
  4. The Music Industry let Apple take control of the music industry. It might be great for users but it’s not great for Music Publishers because they are selling $1 songs instead of $11 Albums. Additionally, all the control is with Apple and (to an extent) Amazon.
  5. The list goes on and on. New, upstart technology companies always make an idiot of existing industry giants. The sad thing (from a strategy perspective) is just how often the established gatekeepers think that the new upstarts have the best interest of the existing gatekeepers in mind. Oh this nice young man wants to help us. Young Man, here’s a list of our best customers and thank you so much for all the help.

For all these points PLEASE keep in mind that I’m not saying ‘This is not good for customers’. Of course it is. If you can get free music and free movies and free software – it’s obviously great for customers. And it’s great for the technology company supplying you all this for free – it can run ads and make money, or charge you a subscription.

It’s bad only for the creators and the gatekeepers. Because they gradually lose profitability and control.

It’s madness for the existing powerful companies in a space to accelerate their own demise by trusting new technology companies. The more ‘savior’ and ‘good’ a company seems, the higher the chance it’ll eat you alive (you = existing gatekeeper).

WalMart and Target should NEVER have sold Kindles

If you expect the companies to have half a brain they should have understood that Kindles which allow buying any book, any time, instantly would erode their own book sales. So carrying the eInk Kindle was a stupid decision.

However, it takes a special level of pigheadedness and stupidity to not see what the Kindle Fire was and is.

Perhaps now that Amazon went overboard with Sponsored Offers and Recommendations, it finally struck the fine people at WalMart that they are selling mini Amazon.com stores. Better late than never.

People underestimate the Power of the Path of Least Resistance

WalMart and Target, and people who defend their ridiculously bad decision of selling mini Amazon.com stores, probably make a lot of assumptions -

  1. People would never shop for groceries online.
  2. People would not be willing to wait an entire 2 days.
  3. People would want to see things in person.
  4. People would not go to a store and then buy online.
  5. People want the convenience of a large store they can do their entire shopping at in one trip.
  6. People want to see real people.
  7. People want same day gratification.
  8. People love the weekly drive to the stores.
  9. People want the social aspect of shopping.
  10. People want to support their local retailers.

Let’s take WalMart’s case and consider why each of these assumptions is shortsighted -

  • People would never shop for groceries online. Well, Amazon is setting up Amazon Fresh and gradually expanding it. We’re soon going to find out how people react to grocery shopping online if there’s same-day delivery.
  • People would not be willing to wait an entire 2 days. They won’t have to. Amazon is setting up enough distribution centers to achieve same day and next day shipping in lots of areas.
  • People would want to see things in person. The Zappos approach – free returns. Amazon already has 30 day returns. They could expand and say – buy 3 items and keep the one you want.
  • People would not go to a store and then buy online. They do it all the time already.
  • People want the convenience of a large store they can do their entire shopping at in one trip. What store can be bigger than an online store selling ten million items?
  • People want to see real people. Not really. It helps but it costs a LOT to have good qualified sales people. Brick and Mortar stores are losing that and it means that the value of real people customer service is declining.
  • People want same day gratification. Amazon is setting things up to deliver this.
  • People love the weekly drive to the stores. That’s just nonsense.
  • People want the social aspect of shopping. Again, this is a bit of a fantasy.
  • People want to support their local retailers. WalMart, how did that work out for all the small grocery stores you drove out of business?

Yes, there are very REAL advantages to shopping in a store. However, there are also disadvantages. And Amazon keeps reducing the advantages real stores have (instant gratification, quick gratification, selection), and it keeps increasing the advantages it has (cheaper prices, wider selection, no checkout lines, etc.).

The Path of Least Resistance is already online stores for a sizeable percentage of the population (perhaps 15% to 20%). As Amazon keeps refining things it’ll reach the point where 40% of the population prefers online shopping. At that point the retail stores will be in trouble because they will start losing out on volumes and impulse purchases and their prices will become less competitive.

Every Kindle Fire is an Amazon.com Mini Store in Customers’ Hands

This is the part that totally baffles me. Was this not clear to Target and WalMart from the start?

They have the following options -

  1. Sell iPads where they make a cut and Apple doesn’t sell anything other than digital content. Not ideal but not bad.
  2. Sell Google Tablets where they make a small cut and Google is only interested in online search and in getting a cut of online transactions. This is worse than Apple because there’s less money and Google has more of a ‘I want a cut’ mentality. However, this is still not that bad.
  3. Sell Kindle Fires where they make a small cut and ALSO make it easier for their users to BUY EVERYTHING easily from Amazon. This is absolutely crazy. It’s the equivalent of WalMart setting up Amazon.com Stores in people’s houses.

There’s no Room for Confusion – Selling Kindle Fires was a self-defeating move by WalMart and Target

People fall into two categories -

  1. People who realize that selling Kindle Fires is the stupidest thing WalMart and Target could do. That WalMart and Target are hammering in the nails into their own coffins by selling Amazon.com mini stores to their loyal customers.
  2. People who assume that ‘Having that Amazon mini Store in people’s hands 2 to 3 hrs a day doesn’t matter’ OR that ‘People will pick a tougher path over The Path of Least Resistance’.

The latter category will use strange arguments like – People could still go online to Amazon.com from any Tablet. Yes, of course. But that’s very different from having a device which literally bombards users with ‘Stuff they can buy from Amazon’ constantly.

Big difference between -

  1. Once a week I go to Amazon.com on my iPad I bought at WalMart.
  2. Every 15 minutes I see one thing I could buy from Amazon on my Kindle Fire HD I bought at WalMart.

Add on the fact that MOST media purchases on iPad go to Apple whereas most media purchases on Kindle Fire will go to Amazon.

It’s not even close. WalMart and Target were literally signing over hundreds of dollars in digital media profits per customer to Amazon with every Kindle Fire purchase. They were also losing a few hundred dollars in physical item profits per customer themselves (which also would go to Amazon).

It’s such bad strategy that it’s painful. It physically pains me to see WalMart and Target selling Kindle Fires. It’s one thing to get beaten by technology because it’s better technology. It’s completely different to be stupid/ignorant/clueless enough to hasten your own demise and to hand over your BEST customers as fast as you possibly can.

We aren’t yet at the Inflection Point

Well, WalMart has come to its senses. Target came to its senses about 5 months ago. At some point other retailers will realize what’s really going on. We haven’t yet reached an Inflection Point – a point at which retailers are GUARANTEED destroyed and Amazon is completely unstoppable. If more retailers start realizing what is REALLY going to happen with all the Kindle Fires they are helping sell, then hopefully retailers can avoid the Inflection Point.

A state of equilibrium, where Physical Retailers and Amazon keep competing without killing each other, would be nice. A LOT of people assume this is what’s going to happen. Actually, it’s very unlikely. If you think about the advances that are happening, and think about the 10 to 20 year scenario (instead of 2 to 4 years out), then it becomes evident that physical retailers need to BOTH lock online reatilers out of their stores AND create their own online presence. If that doesn’t happen, Amazon will dominate ALL of retail in the US within 20 to 25 years. Then all the retail battles will be fought only between online retail giants like Amazon and Rakuten.

Filed under: thoughts | Tagged: , | 8 Comments »

Looking at 10 Kindle annoyances, Physical Book + eBook combos

Posted on November 2, 2010 by switch11

Now that the Kindle 3 has the holiday market all to itself a few interesting questions come up -

  1. Are there any risks for the Kindle?
  2. Where’s the motivation for Amazon to continue improving the Kindle? It was the Nook that led to a ton of improvements last November. What’s going to motivate Amazon this time around? Anything?
  3. Which company is going to help push ereader prices lower now that Sony is going for ‘quality’ and Nook is going for $249 LCD screen reading devices?

Let’s start by looking at a list of 10 Kindle annoyances from PC World.

10 ways Amazon could potentially improve the Kindle

Keir Thomas at PC World lists his top 10 Kindle irritations -

  1. Only One User. This is actually a very valid complaint. He talks about not being able to have a user-specific set of bookmarks and notes. The other, perhaps more important, benefit would be having limited accounts with either parental controls or buying restrictions.  
  2. Where are the Apps?  He talks about the lack of apps like a to-do list and mentions that he could live with apps that had occasional flashing and blanking of the screen. Another valid point – There’s definitely a need for more Kindle apps.
  3. Not allowing Dictionary look-ups for phrases. Don’t fully understand this.
  4. The Lack of Covers. He isn’t the only one bothered by Publishers’ amazing ability to forget to include book covers. Perhaps they’re too busy trying to decide whether they should price their ebooks higher than paperbacks or higher than hardcovers.
  5. The Progress Bar at the bottom. This is a strange complaint. He doesn’t want it as he doesn’t want to be reminded he’s not reading a physical book.
  6. Lack of more Fonts. A somewhat valid complaint.
  7. Free 3G isn’t free for personal documents. This is hilarious – so it’s not enough for Keir Thomas that Amazon offers free store browsing and free downloads and free Internet surfing and, for US Kindle owners, free worldwide Internet surfing wherever there is WhisperNet. He thinks Amazon should also pay for his personal document transfers. Perhaps he’d like a breakfast buffet to go with that and a Netflix account and an Amex Platinum card with no limits.
  8. Global Font Choices. He would like font choices to be on a per-book basis. That would actually be a disaster – imagine having to change the font size and style on every single book you ever read.   
  9. The Location of the Home button. His argument is not that it gets pressed accidentally but that it’s not placed in a more central location. Well, 1 inch away from the 5-way seems pretty central to me.
  10. Too easy to turn pages by mistake. This is a somewhat valid argument. Until you figure out how to pick up the Kindle without pressing the page turn keys you are going to turn pages by mistake.

There are some very good points in there – Kindle does need multiple user profiles (especially ones with limited access rights), more fonts would be great, Amazon should get more apps out. There are also some very unique complaints which probably don’t appear on most Kindle owners’ wishlists. However, what’s refreshing is that the reporter went to the trouble of actually using a Kindle before writing about it.

Will a few of these suggestions be incorporated?

If Nook 2 had been an eInk or ePaper based eReader it would have put a lot of pressure on Amazon to improve the Kindle. Then we would have seen drastic improvements to Kindle 3 and Kindle 2 software – perhaps even some of the things listed above. Without dangerous competition Amazon has little motivation to keep improving the Kindle.

Except … there actually is still some very dangerous competition for Amazon. Exhibit 1: WalMart.

WalMart’s DVD+Streaming combination, and Amazon’s similar offering, set a new standard for physical+digital combo offers

WalMart just announced that anyone buying the 3-disc special DVD of Toy Story 3 would also get a digital copy from the Vudu movie streaming service (which WalMart bought in February 2010). It’s a very interesting physical plus digital combination offer and hopefully makes its way to books.

Amazon is making some strong moves too – It has a program called Disc + On Demand where users who buy select DVD or Blu-Ray discs from Amazon get to watch the movie instantly using Amazon Video on Demand. The digital download will sometimes be a rental that must be watched within 30 days and sometimes it’ll be an actual digital copy you can keep forever (or until you re-locate to Mars).

We suddenly have two separate and equally impressive digital+physical combination offers -

  1. WalMart’s ’buy the physical DVD and get the digital download free’ offer for movies.
  2. Amazon’s ‘buy the physical DVD and get an instant video rental or a digital copy’ offer for movies. It’s ostensibly so you can see the movie before your Disc arrives – However, in cases where Amazon gives you a digital copy to keep it’s effectively a physical+digital combination deal.

There are certain qualifiers – it’s only available on select movies (in case of WalMart just one movie), it might be ended at any time, DVDs are generally very expensive. However, the really big deal is that physical+digital combinations are now a reality and the digital version is a free add-on.

Please Note: The prices are the same as for physical DVDs. So the digital version is a bonus – It’s not a trick where the price is double or 50% higher.

You know what – getting similar offers for books would be marvellous. Buy a hardcover and get a 14 day rental of the Kindle version - perhaps even get a Kindle Edition for free.

It’s remarkable what fierce competition will do – WalMart and Amazon just raised the value bar for DVDs. This is exactly the sort of thing we’ll miss out on in ebooks if some company doesn’t start challenging Amazon and the Kindle soon.

Filed under: kindle | Tagged: , | 20 Comments »

Amazon Vs Walmart – $10 Hardcovers

Posted on October 15, 2009 by switch11

What’s a bigger threat to Amazon than Google? WalMart. 

Amazon Vs WalMart is shaping up to be a more significant story for books than eReaders this Holiday Season. Why? Because the unthinkable is happening -

Breathless by Dean Koontz and 9 other highly anticipated hardcovers are being sold for $10.

$9.99 Kindle Prices make the jump to Hardcovers courtesy WalMart.

Every Publisher’s nightmare is coming true. Wal Mart and Amazon are in a brutal price war inspired by $9.99 Kindle prices.

Wal Mart started it by announcing that 10 of the most anticipated books this holiday season would be sold for just $10. Hours later, Amazon matched it. Wal Mart promptly said that it would cut prices to $9.

Fighting Words from CEO Raul Vasquez -

If there is going to be a ‘Wal-Mart of the Web’, it is going to be Walmart.com,” said Walmart.com CEO Raul Vazquez in an interview. “Our goal is to be the biggest and most visited retail Web site.

The ‘Wal Mart Vs Amazon price war’ Books include (all available for preorder at Amazon) -

Breathless by Dean Koontz, Sarah Palin’s Going Rouge, Stephen King’s Under The Dome, I, Alex Cross from James Patterson. Ice by Linda Howard.

The Lacuna By Barbara Kingslover. Kindred in Death by J. D. Robb. Ford County by John Grisham. First Lord’s Fury by Jim Butcher. Pirate Latitudes by Michael Crichton.

WalMart won’t admit the Kindle and its $9.99 bestseller price is involved. However, James Patterson points out the obvious -

“Obviously e-books have gotten this thing going,” said Mr. Patterson. “E-books are terrific and here to stay. But I think that people need to think through the repercussions….But I’m not taking sides….I’m not the endangered species here.”

Wal-Mart said it wasn’t trying to match the price of electronic books. Still, the $10 price tag coincides with the $9.99 that Amazon.com charges for its Kindle e-reader best-sellers

Amazon on its own end hasn’t exactly been sitting around -

  1. PC World has the scoop on Amazon introducing Same Day Shipping in New York, Philadelphia, Las Vegas, Baltimore, Boston, Washington DC, and Seattle. Order as late as 11 am (1 pm in Seattle).
  2. Amazon UK has made Free Shipping standard on all purchases this holiday season in the UK.

In all the excitement about eBooks we might be missing the advent of $10 hardcovers.

Speaking of eBooks it’s still not clear to me why Google want to jump into an industry everyone else thinks is dying.

Why is Google getting into selling eBooks?

Google today blew away earning estimates by reporting profits of $1.64 billion for the latest quarter. That seems picture perfect until you look at the fact that 95%+ of that is from Search.

Until Google finds another revenue source it’s in the unenviable position of being the only Tech Giant that has to rely on one source of revenue.

For example, Apple has -

  1. iPods and iPod Touches.
  2. iTunes Music.
  3. iPhones.
  4. iPhone Apps. 
  5. Macs.

And more.

Google has been trying out a few different areas i.e. Google Apps, Cloud Hosting, News. However, it seems that for some reason Google has decided there is enough profit in Books to focus on eBooks -

  1. The whole Google Books Settlement to get orphan works. 
  2. Offering free books to eReader makers to strike up partnerships.
  3. Now Google Editions and actually selling ebooks.

Obviously Google see a way to steal away ebooks from Amazon, not to mention enough profit in eBooks to make it the second pillar supporting Google Inc.

Kindle Vs Google Editions – Wondering what Weapons Google will use

With Google announcing a 2010 debut of its Google Editions offering it seems the Amazon Vs Google Wars will start off with Kindle Vs Google Editions.

It’s going to be interesting to see what weapons Google uses against Amazon -

  1. Will it be search? That would raise a lot of questions.
  2. Perhaps Google Books?
  3. Perhaps low prices?
  4. Perhaps ebook prices subsidized by advertisements.
  5. Partnerships perhaps. B&N’s eReader uses Android, Sony is going to release the first Android notebooks. Both get a million free Google Books. They’d be natural partners for Google Editions.
  6. Partners from the Google Browse program. Google has already confirmed these will be part of Google Editions.

We also have all the openness concepts that Google can leverage i.e.

  1. Open platform. 
  2. Open formats.
  3. No DRM.

DRM is going to be the really interesting one – Don’t see Publishers agreeing to it and at the same time DRM would be so unlike Google. Perhaps Google uses the Cloud in some way to convey the idea that there is no DRM.

Filed under: books | Tagged: , | 1 Comment »

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