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Competition between the two has come to this

Wal-Mart reported that it will no longer sell Amazon's e-readers and tablets online or at its brick-and-mortar stores.

Amazon, which makes Kindle e-readers and Kindle Fire tablets, had its products booted from Wal-Mart due to the fact that Amazon is a strong competitive force against brick-and-mortar stores.

Physical retail stores like Wal-Mart and Target have faced tough competition against Amazon in recent years. The huge e-tailer has offered the same products at lower prices, (often) no sales tax and for fast, cheap delivery.

This obviously made it hard for the brick-and-mortars to compete. Stores like Best Buy, Wal-Mart and Target complained that Amazon's lack of sales tax collection in most U.S. states was unfair, leading to more and more states demanding that Amazon start collecting (mainly to cover the states' own budget crisis').

At long last, Wal-Mart and friends got their wish when Amazon agreed to start including sales tax in customer orders; however, the e-tailer did so in exchange for more distribution centers throughout the U.S. so that it could launch a same-day shipping feature -- a whole new competitive edge in favor of Amazon.


To top it all off, Amazon's e-readers and tablets have been a hit. In fact, Amazon's Kindle Fire tablet has been the only other tab to take a chunk out of the iPad's market share.

Amazon just announced a whole new generation of Kindle Fire tablets (Kindle Fire HD), including an updated $199 7-inch Fire; an 8.9-inch version for $299, and a 4G LTE model for $499. On top of that, Amazon is offering 250MB of bandwidth per month, 20GB of cloud storage space, and a $10 in Appstore credit for only $50 per year.

It's easy to see why Wal-Mart is a little upset. It's competition is growing and offering even better offers all the time, leaving the brick-and-mortars in the dust. But there is another side to this -- the Kindle Fire was the hottest holiday gift in Q4 2011, racking up tons of sales for not only Amazon, but the physical stores like Wal-Mart too. With the Kindle Fire HD line launching either September 14 or November 20, Wal-Mart could lose out on the huge sales that these tablets could potentially draw. 

Target stopped selling the Amazon Kindle line this past Spring as well.

Source: Reuters



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RE: Duh
By EricMartello on 9/22/2012 3:35:09 AM , Rating: 2
The problem is not that Walmart considers "back end" amazon sales via the kindle a "loss", rather that what is sold via the kindle is one less thing that the person may be inclined to purchase at walmart - in other words they believe they are giving up market share to Amazon (who directly competes with Walmart across many of the same retail product categories) with each kindle sale.

It's not viable for walmart to release yet another tablet to compete with the kindle so the best play, as they see it, is to not help the proliferation of the kindle by removing it from their store shelves.

It's not a crazy position and it's not entirely unreasonable...although if I were Walmart I'd want to sell a product like that where I would also benefit on the back end sales. They may be doing this as part of a negotiation strategy with amazon in order to work out just such a deal.


RE: Duh
By Reclaimer77 on 9/22/2012 1:21:11 PM , Rating: 2
Wal-Mart is a brick n mortar retailer with nearly no online presence outside of a website which directs sales to their own stores. Since when is "back end" sales some big consideration here?

This whole thing is silly. People are going to shop at Amazon whether or not they sell Kindles there. All they're doing is losing sales revenue here.

I don't mind that Wal-Mart is deciding not to sell a product. I guess what I take issue with is how asinine the reasoning behind it is.


RE: Duh
By EricMartello on 9/22/2012 9:36:33 PM , Rating: 2
quote:
Wal-Mart is a brick n mortar retailer with nearly no online presence outside of a website which directs sales to their own stores. Since when is "back end" sales some big consideration here?

This whole thing is silly. People are going to shop at Amazon whether or not they sell Kindles there. All they're doing is losing sales revenue here.


It's not about Walmart's website vs Amazon - it's the fact that kindles do generate high profits for Amazon, who is a direct competitor of Walmart in many of the same retail categories as I said before.

Even if walmart doesn't sell ebooks and the majority of purchases made with the kindle are likely to be ebooks - that still translates to more profits for one of walmart's major competitors - Amazon.

If you compare this to walmart selling ipads it's not the same thing, because Apple does not compete with Walmart directly for retail sales including basic stuff like groceries...so it's no skin off of Walmart's nose if the ipad drives more back end sales for Apple via itunes.

quote:
I guess what I take issue with is how asinine the reasoning behind it is.


Walmart didn't get to where they are today by making bad business decisions. If you were running a store and your major competitor asked you to sell a product of theirs on your shelves, would you take the one-time profits from each sale of said product knowing that for every one you sell, you are adding a potential high profit revenue stream to your competitor?

Keep in mind that the profits Amazon generates from the sales of digital goods like ebooks have virtually zero costs attached to them (nearly 100% profit), so the profits they make can be used to undercut Walmart on popular items as well as offset shipping costs making it more difficult for Walmart to compete.


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