Wal-Mart's Kindle decision a no-brainer

The store's move to stop selling the e-reader will have only a minor impact on the online retailer's revenue.

By Trefis Sep 26, 2012 10:08AM
Wal-Mart (WMT) announced last week that it will stop selling Amazon's (AMZN) Kindle e-readers and tablets. The decision indicates that the world's largest retailer is wary of increased competition from Amazon.

The retailer will stop carrying Kindles beyond its existing inventory and purchase commitments in hopes that consumers will be more interested in Apple's (AAPL) iPad and other gadgets.

Wal-Mart follows in the footsteps of Target (TGT), which made a similar decision in May. We expect this decision will have only a minor impact on Amazon's revenue from the Kindle, as the majority of the devices are sold directly through the company's website.


Wal-Mart's decision is a no-brainer

Wal-Mart's decision did not come as a surprise, as it was increasingly being treated as a Kindle showroom by customers. The device is integrated with Amazon's online store and makes it easy for Kindle users to shop at Amazon.com. It was evident that the increasing penetration of Kindle devices would encourage customers to spend more at Amazon.com, which offers products at competitive prices compared to Wal-Mart or Target.


amazon

Forrester Research analyst Sucharita Mulpuru, who calls the Kindle a Trojan horse in other stores outside of Amazon, believes Wal-Mart "should have made this decision a long time ago," he told Reuters. The timing of the decision ahead of the holiday season means that Wal-Mart stands to lose the holiday season sales.

Revenue from Kindle may dip in Q4

Amazon's Kindle hardware revenue and the number of devices sold may dip slightly (if at all) as a result of the move. The dip will influence the decision of prospective customers who may choose to stay loyal to Amazon and buy a Kindle device from the website or instead buy another tablet like the Apple iPad, Google Nexus or Barnes and Noble's Nook that remain available at Wal-Mart.


The good news for Amazon is that two other marketing channels, Best Buy (BBY)and RadioShack (RSH), will continue to stock the Kindle range of products. Another positive from this move is better margins from the hardware sales, provided the company is able to retain prospective customers, now with the middlemen taken out of the equation.


Amazon Kindle Units Sold

However, if other retailers follow suit, it may curtail Amazon's reach toward buyers who still prefer to shop at physical stores vs. online stores. With seamless connectivity to its e-store provided by the Kindle, Amazon had an opportunity to convert Kindle users into its own users. But with Wal-Mart pulling back it will be tougher for the company to do so.


Amazon Kindle EBITDA Margin

We have a $222 estimate for Amazon shares, which is 15% below the current market price.

294Comments
Sep 26, 2012 5:52PM
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We (Americans) are our own worst enemy. We want the best product for the least amount of money so we buy products made in China, Japan, Korea. Then we complain because there are no good manufacturing jobs that pay a decent wage left in our country  and we complain that our government is to blame for letting jobs go overseas. Check out where your money is going. American made shoes, no way, American made shirts and pants, Nope. American made TVs, gone. the only reason that our homes are built here is they havent figured a way to import them. Wake up America, buy American or become a nation of grill cooks and grocery baggers. Our greed to be our downfall
Sep 26, 2012 2:44PM
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Figured wal-mart wouldn't sell them because they weren't  made in China!
Sep 26, 2012 3:30PM
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I don't care if Wal-Mart sells the Kindle or not, so bid deal for this news to me.

I can buy the Kindle online at Amazon and get free shipping, I believe a better price as wel, and it will arrive workingl....

The last 3 laptops  bought at Wal-Mart all had to be returned due to defects of one sort or another, same thing with a camera. I'd swear those product stockers there play smash the the products around in the stock room.

Sep 26, 2012 3:07PM
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Screw walmart it's the shittiest store ever.

Sep 26, 2012 9:50PM
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When are we going to realize that everything Apple sells is overpriced? 
Sep 27, 2012 12:24PM
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I view it as a victory for all of us.  The less busines that WalMart gets, the better.
Sep 26, 2012 2:45PM
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To hell with Walmart and their low-paying jobs. They are sleeping with the outsourcing enemy of the USA;RED CHINA!!!
Sep 27, 2012 2:32AM
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When I read the beginning of the report, the only reason I could think of for Wal Mart not to sell the Kindle, was maybe the Kindles were made in the U.S. and not China.
Sep 27, 2012 1:46PM
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I demand that our government fix the economy.
I demand that American corporations give jobs to Americans.
I demand that American corporations stop building factories in Asia and Mexico.
I demand that Americans stop losing their homes because they can't find a job.

Oh well, it's time to get in my Japanese vehicle and go to Wal-Mart and buy more products from China, South Korea, Vietnam, Indonesia, India and Mexico.

Signed,
An American Consumer

Sep 26, 2012 7:36PM
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Seriously, someone, have you ever ordered single thing from Amazon? They are not greedy, best prices around on most things and free shipping on any order over $25 so don't think they're getting rich that way.  Do some research before commenting and looking like an idiot next time.
Sep 27, 2012 2:17AM
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Just give me a thumbs up for not spouting who's the best and saying all the others suck.  Vote with your dollars -- it speaks volumes to the retailers.
Sep 26, 2012 4:15PM
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Anyone with any sense of right or wrong would not buy anything at Walmart.  They are the epitome of greed, worker exploitation, and hard heartedness.  Walmart and its shoppers have devastated mainstreet America and fooled State/local governments into subsidizing their expansion! 
Sep 26, 2012 2:37PM
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Surpised BestBuy still sells them, seeing as how they are already Amazon's showroom for big screen TVs
Sep 26, 2012 4:03PM
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I think the only reason that Walmart is stopping the sell of Kindle is that they will make more money on the Ipad.
Sep 27, 2012 12:06PM
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To hell with wal-mart, and I will go to Amazon. I can at least find U.S. Made products on Amazon...
Sep 27, 2012 8:46AM
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In other words, buy Amazon stock. If Walmart and Target are afraid of you, you are doing something right.

Sep 26, 2012 2:58PM
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had to make room for inedible GMO CORN And other junk foods.
Sep 26, 2012 3:18PM
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I still do most of my shopping at Amazon. The Kindle on Amazon is free shipping anything over $25 can ship with super saver shipping which is free.

Sep 26, 2012 4:04PM
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..its only a matter of time before Amazon opens its own 'real' stores
Sep 26, 2012 8:19PM
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Talk about recieving good service, my Kindle Fire went down about a week ago. I called Amazon customer service and they had a new Kindle at my door within 24 hours. I have owned my Fire for about 10 months and I am amazed at how easy it was to get satisfaction. I purchased it online from the Amazon website. They have raised the bar for customer service if you ask me.
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