Does WalMart gain by not selling Kindles ?

An article in the New York Times (September 20, 2012) describes WalMart’s decision to stop selling Amazon’s Kindles once its inventory runs out. Retailers are concerned about customers browsing for online prices while in the store and buying products online. Amazon thus loses a display for customers to experience its products, but WalMart loses customers who might avoid it altogther. Does dropping the Kindle help WalMart protect its demand volumes ? Or does the availability of lower price tablets suggest a better alignment of its assortment with its customer base ? Amazon, whose volumes are 12 % of WalMart’s sales, is a fast growing etailer. Do such actions represent reasonable competitive responses to protect WalMart’s territory ?

About aviyer2010

Professor
This entry was posted in Ecommerce, Global Contexts, Supply Chain Issues and tagged , , , , , , . Bookmark the permalink.

10 Responses to Does WalMart gain by not selling Kindles ?

  1. Pradeep Hiremath says:

    With Amazon’s Kindle and the Google’s Nexus tablets being the top contenders for the status of ‘poor man’s iPad’, its not surprising that the consumption of the Kindle has grown recently. But, with a plethora of tablets to choose from, customers would not miss the Kindle in a Walmart store when they can conveniently get it directly from the maker! This also seems feasible for Walmart considering that showrooming (when shoppers check out products in stores that they then buy online) has become something of a trend today.
    At the outset, it seems unethical on the part of Walmart to stop selling competitors’ products to protect its territory. But we have to consider that Kindle is being used by Amazon as an extension of its online store and keeping in mind the low margins for the retailers in the super-competitive tablet market, it was a logical thing to do for Walmart to stop selling Kindles. The nature of etailing also supports the argument towards Walmart’s decision wherein customers stick with an etailer once they are satisfied with the service.
    Keeping in mind that another retailer Target took a similar decision a few months ago, Amazon would find it hard to find enough physical display space if other retailers follow suit, display space which is the main driver for sales during the holiday season.

  2. Anisha Dutta says:

    I think it may not help Walmart much. Amazon is anyway an online retailer, and customer purchase order are sourced from nearest local available vendors. Considering Amazon’s growing business, any small scale or medium scale store retailer who does not eat into Walmart’s territory can be brought to fulfil the interests of both Amazon and the other store retailer- ie to give its customer a feel of its product, and as for the store ( other than Walmart) to show their existence and willingness to grow.

  3. Rahul Dsouza says:

    Amazon`s products are 12% of Walmart`s sales. We need to know the figure of Kindles sales percentage of walmart`s sales.

    Dropping the kindles will only take care of the demand deviation of the Amazon`s kindles. But a whole lot of sales is lost if the kindles is dropped. Assumption: Kindles constitute a large portion of the 12% of the walmart`s sales.

  4. Rahul Dsouza says:

    If Kindles are dropped off, Inventory is no longer needed. Hence inventory holding cost of Kindles are no more. But before we knock off the kindles, We need to look at the profit margin of the kindles. Hence its the profit margin of Kindles Vs the reduced inventory holding cost of the kindles. Whichever is greater is the winner.

    Profit margin > Inventory holding cost – dont drop off kindles
    Profit margin < inventory holing cost – drop off kindles

  5. Yichen Ding says:

    I am the Kindle user and I bought the Kindle from Amazon. For lots of users like me, Kindle is the product of Amazon,we bought it for reading the Ebooks. Amazon provides not only the products also the service like the discourt price for the Ebooks,the membership,renting and borrowing the ebook from Amazon,sending the latest news to your Kindle and so on. I think that is why most customers choose to buy the Kindle on the Amazon.Meanwhile the amazon is the famous and maybe the world’s largest online retailer,comparing with Walmart,it is more dominated to provide e-services.In my opinion,stop selling the Kindle is the wise choise.,Walmart should use more its own adventage such as the supply chain management and the minimize margins and maximize returns . For protect its territory ,Walmart now has its website,customer can search the items they want and order them.This is one of ways Walmart try to do some change to chop with the impact of online retailers and the change of customer psychology and form.

  6. Qiutong Zhang says:

    There should be two reasons why Walmart drop the kindle:
    Since Walmart is also developing his own ecommerce, helping the amazon to increase the scale of channel of ecommerce is in competition with his own. Instead of helping others, Walmart would rather sell the product of himself.
    Holding the kindle inventory is really expensive. In that case, Walmart do not have cash flow to do other parts. Also, the holding cost will increase the total cost, thus decreasing the profits.
    But there are still a lot of bad influence on these. Customers can really experience the products in Walmart and most of them would like to buy it if they like it, especially the popular products like kindle. Still, customers not only buy kindle, at the same time,they may buy a lot of things in Walmart. In this case, Walmart will lose a lot of potential customers and also decreasing the selling volumn.

  7. Suvarthi Datta says:

    The argument that Walmart would face lower demand (decrease in footfall) when it stops selling Amazon’s Kindle is flawed. We need to know whether the customers who visit Walmart to get a feel of the kindles buy any other products from Walmart during that visit. The degree of correlation between their visit and their buying of products at Walmart, will help us gauge whether we can expect a decrease in demand at the Walmart when it stops selling the kindles. If there is a high degree of correlation, it would be a good idea to stock the kindles.

  8. Abhishek Sengupta says:

    To decide whether Walmart would face a lower demand by not selling kindles, firstly we need to find out the percentage of customers visiting Walmart only for the kindles for a year. If that percentage is on the higher side, there is a reason to worry. But there are also equivalent items of other companies available in Walmart from which also the customer can serve their purposes of browsing prices online for several products.If we have the figure of percentage sales of kindle out of total similar types of products of other companies for a year, it can give a clear indication about the impact of not selling kindles in Walmart.

  9. Vaibhav Narain says:

    Dropping kindles from the inventory reflects the protective approach of Walmart. Though other brick stores are selling Kindles, but , Walmart being the largest retailer does have a substantial contribution in the sale of Kindles. This will to an extent reduce the number of those sales in which customer walks in the store to have a look and feel of the product but buys online.

  10. Koshika Sharma says:

    To come to a conclusion on this , we first need to understand whether customers who visit the Kindle section in Walmart buy any other product or not. If it can be ascertained that customers do not buy any other product after buying a kindle then knocking off Kindle from the shelves is beneficial, but if customers buy other products as well then this action might result in loss of sales. Kindle can be an added value which customer see with Walmart and knocking it off the shelves might turn-off those customers.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s