Does Amazon Have Problems Playing with Others?
John is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Not too long ago I was reading about the news that Wal-Mart Stores (NYSE: WMT) would no longer be selling Amazon.com's (NASDAQ: AMZN) Kindle devices. Wal-Mart isn't the first major retailer to stop selling Kindles, either; Target Corp (NYSE: TGT) also recently made the decision to stop carrying the e-readers. While contractual obligations will be honored to sell existing stock, no new tablets or e-readers in the Kindle family will be available at the stores.
The announcement concerning Kindle sales at Wal-Mart came around a week after it was discovered that Amazon wasn't going to be directly selling Nintendo's new Wii U console, much to the dismay of Amazon shoppers who had signed up to be notified when preorders for the console became available. Third-party sellers are still able to list the consoles on Amazon, though those who do seem to be banking on a high demand for the console are adding $150 or more to the price. This isn't necessarily a huge shock as there are rumors of a long-running feud between Amazon and Nintendo which previously resulted in the 3DS handheld console only being available from third-party sellers as well.
The movement of retailers away from Amazon's products brings two questions to mind. The first is "What gives?", though it's unlikely that a definitive answer to that question will be given. The second question and the one that's probably more on the minds of those who frequent the Motley Fool blogging network is "What does this mean for the companies involved?"
Amazon and the online shopping experience that it represents have long been at odds with physical retail stores like Wal-Mart and Target, especially since it remains one of the go-to destinations for online purchases even as every major retailer attempts to cash in on the greater demand for convenient online service. Features like website-to-store shipping, in-store returns and being able to check availability in your local store help, but when you factor in things like Amazon's "Super Saver Shipping" on a lot of orders over $25 and the various benefits associated with Amazon Prime then these features seem to lack the punch necessary to convert Amazon customers by significant amounts.
It's worth noting that the majority of Kindle devices are purchased directly from Amazon; while there are obviously some sold through retail outlets like Wal-Mart and Target, sales figures show that most people go straight to the source when they want to pick up a new Kindle. The effect that Wal-Mart and Target will have on the Kindle's sales will likely be minimal, and since there aren't a lot of people buying the e-readers from these retail outlets anyway they aren't going to suffer a huge loss of income either. These stores will keep stocking third-party Kindle accessories (which they likely sell more of than the Kindles themselves) and will open up slots in their display cases for additional tablet or phone offerings once the existing stocks are depleted.
Along those same lines, while this sounds like big news it's unlikely to have much in the way of repercussions for any of the retailers involved. Wal-Mart’s stock is down slightly since the announcement, but that's after a slight surge when the news dropped; the company is still trading slightly above what it was before the announcement was made. Amazon dipped slightly after the announcement was made but is already well into recovery. Even if Wal-Mart, Target and Amazon do end up losing some business from customers looking for an e-reader or a tablet like the Kindle Fire, new products such as Microsoft's Surface tablet are just around the corner and the Christmas shopping season will follow soon after that.
Retail is and always will be a highly competitive business, and as with any competitive business there will be relationships made and relationships broken. Perhaps one day we'll all live in peace and once again be able to buy Amazon-branded products at Wal-Mart and Target while ordering Nintendo consoles from Amazon.com, but until then the ups and downs and side-to-sides of these companies will remain entertaining if nothing else.
Croaxleigh has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services recommend Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.