Wal-Mart throws in the towel

Wal-Mart throws in the towel

What would you call a singer who said they weren’t going to sing any more, a boxer who wouldn’t box, or a poet who wouldn’t…um…Poe? ;)

You might call that person a quitter.

Well, yesterday, Wal-Mart said they weren’t going to sell Kindles any more:

Reuters article

For me, as a former retailer, that’s just giving up.

They are going to keep selling iPads and NOOKs…so what’s different about the Kindle?

Amazon is clearly a competitor. Barnes & Noble does (increasingly) sell toys, but they don’t sell those “diapers and windshield wipers” I keep saying are the driving force behind Amazon promoting Prime.

This is another one of those moves that just feels like spite to me, and will ultimately hurt Wal-Mart.

People are going to want Kindles (this includes the Kindle Fire line, the tablets) this holiday season. They are going to be “magnet items”…they will draw people into stores.

Not into Wal-Marts, though.

It also creates a big opening for Amazon to have touchable Kindles in other stores…and they have been looking at opening their own stores (somewhat like Apple stores).

Kindle vending machines are another real possibility.

When people don’t go into a Wal-Mart to buy a Kindle, they may just get the other things they need at the same time online….hm, I wonder where that would be? ;)

This post by Bufo Calvin originally appeared in theĀ I Love My Kindle blog.

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5 Responses to “Wal-Mart throws in the towel”

  1. Edward Boyhan Says:

    I think the decision is more or less rational — at least over the short to intermediate term. This follows a similar move by Target. Bricks & Mortar stores increasingly don’t have many good options in the face of online retailing’s rise — especially Amazon. Read the following for one analysis of the move:

    http://news.cnet.com/8301-1035_3-57516959-94/wal-mart-fires-kindle-kicks-it-out-of-its-store/

    To this I would add why should they sell Amazon devices at ridiculously low margins or losses that they cannot easily recover selling content as Amazon can. To add some salt: you’re selling something at or near break-even that the customer can then turn around and “use” to buy stuff from Amazon. As Bezos said they’re gonna make money when their customers use Amazon devices not when they buy them. Walmart selling Kindles seems like a lose lose proposition for them.

    Retailers like Walmart and Target have also assumed that Amazon had an unfair advantage on the sales tax front. Well Amazon has been collecting sales taxes in an increasing number of states. There has a recent study done in Texas, and guess what? The imposition of sales tax collections in TX (in force since July) — not much:

    http://blogs.wsj.com/digits/2012/09/17/the-sales-tax-effect-on-amazon-nada/

    • Bufo Calvin Says:

      Thanks for writing, Edward!

      As a former retailer, I always go back to it being a population of sales. That’s how store managers think about it, that’s how publishers think about it.

      The reason why you would sell a low margin product at Wal-Mart is similar to Amazon’s: it inspires other purchases and loyalty. I guarantee you that there are people who would have said, “I never would have gone to Wal-Mart…but they had this great deal on Kindles and accessories, and I wanted to see one before I bought it for my kids. You know what? While I was there, they had a great deal on soda and on the razors I use all the time. It also turned out there was a this cool pizza place right nearby…great place to stop on the way home and grab something I need and dinner for the family.”

      We used to sell TV Guide. The cover price was sixty cents…we sold it for fifty-four cents. It basically cost us more to sell them than we made. However, some of our most loyal customers came in every week to get that TV Guide.

      They could have subscribed to the TV Guide, of course…sort of like the internet, they had a different distribution channel.

      They chose to shop with us…and some of them spent maybe fifty dollars a week at our store. They came in to get the TV Guide…and then bought other things.

      A key thing: if they don’t buy the Kindle from Wal-Mart, does that mean they won’t buy one? Probably not…they might buy it from Amazon, even shopping there for the first time…and suddenly, they are habituated to buying on the internet instead of from Wal-Mart.

      Brick and mortar stores have to make the experience better than shopping on line to win. You might say, “Nobody likes shopping at Wal-Mart”. If that’s the case, and they can’t beat Amazon on prices and selection (and Amazon gets at least close enough on convenience), they might as well close up shop.

      My bottom line on this always: you aren’t going to get people to shop at your store by not selling them what they want.

      • Edward Boyhan Says:

        I agree with everything you say, if your only competitors are other Bricks and Mortar retailers. Online retailing changes the game — they have tremendous pricing (even with sales tax collections) and inventory turn advantages. I won’t go into the long rant about how technologies such as RFID, NFC, and robotics will squeeze storefront retailers even more going forward.

        I will also point out that big box general merchandise retailers like Walmart and Target are in themselves different. Everybody knows about them, and most everybody is in them all the time for something or other — so the one time someone wanders into a Target or Walmart to buy a Kindle isn’t going to materially increase the “impulse” purchases that they were going to get on some other shopping visit anyways.

        And to top it off, Walmart is selling at cost a “tool” that allows them to easily (and at reduced cost) purchase stuff like MMB (Movies, Music, Books) from Amazon that perhaps they had been purchasing at Walmart or Target so with the Kindle purchase I may be losing significant future “impulse” buys.

        There is another kind of big box retailer out there — I’m thinking of the Sam’s Clubs, BJ’s, and Costco’s of the world in which you pay an annual membership fee. When you buy that Kindle, you also get a month’s free Prime membership that is very similar to the annual membership fees you pay for the BJ’s et al of the world. Amazon has pointed out that a significant fraction of Kindle buyers convert the one month freebie into a permanent membership.

        I, myself, so converted when I bought my KF. As I’m writing this, I’m thinking I also have memberships at Sam’s Club and Bj’s. When I think about the kinds of things I buy there (staples, non-perishable foodstuffs) — these are exactly the kinds of things I could probably get from Amazon in two days at lower prices; and my two annual memberships cost almost as much as the annual Prime fee. After some research, it may turn out that I’ll be dropping those two big box memberships…

        I have to thank you for your post (and reply) leading my thought processes down this particular garden path :D (although I suspect Walmart won’t be thanking you anytime soon ;-) ).

  2. Karin Says:

    Several months ago, I bought a backup Kindle Touch in Target, and this was right after I heard that they would stop selling Kindle. The Salesperson said that Target didn’t like Amazon’s business tactics, and I said, that’s a shame because I do like Amazon’s business tactics. I haven’t been in Target since.

  3. jbgator9 Says:

    Won’t bother me a bit as I refuse to shop at Wal-Mart anyway. I hate that they have put so many small stores out of business. I hate to have to run into a huge store if I just want one thing or to browse, and I don’t like the way they treat their employees, so There, WalMart. I do the majority of my shopping at Amazon and have Kindle # 4 anyhow.

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