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Fire Away: It’s Amazon versus the World

Wal-Mart announced today that it would no longer carry Amazon’s Kindle eReaders and tablets, both online and in stores. It is the second retailer to do so, following Target’s decision back in May. Both stores will continue to sell iPads and Barnes and Noble’s Nook, along with other popular tablet and eReader devices.

Amazon makes it more attractive to buy the Kindle and the Kindle Fire on their website, by offering them at slightly lower prices and making it easier to buy and download content for the devices. It makes less sense for a person to walk into a “brick-and-mortar” store to buy the Kindle (unless they seek instant gratification), so it makes less business sense for retailers like Wal-Mart to sell them.

Looking at the bigger picture, Amazon has become a formidable force as an online retailer, given that it often offers more products at lower prices than most physical retailers, and it’s more convenient for people to shop without having to leave the house. It’s also easier for shoppers to compare prices online than go from store to store. By selling the Kindle line in its stores, Wal-Mart has been aiding its very direct competition. But, as Morningstar analyst R.J. Hottovy notes in the Associated Press article, pulling the plug on the Kindle should have very little impact on the bottom line of either corporate giant.

So why is this particularly newsworthy? In business matters, we could consider different companies selling similar products as “mutual enemies” — competitors. One would think that because they’re all competing with each other equally for the same market share, that the graph of their relationships is balanced. However, this is not so, because it turns out they’re not competing equally. Some competitors may team up against a perceived threat — not just for greater profit margins, but for greater visibility, branding, and influence over potential buyers. This is why, despite little projected impact on either Wal-Mart’s or Amazon’s revenue, removing the Kindle from stores is still a big deal. Wal-Mart and Target are physical retailers teaming up against an online retailer, Amazon, for control over merchandising strategies. The Kindle Fire is the second-most popular tablet after the iPad; it’s no secret that Amazon is a heavyweight in the tablet market, so making it slightly harder to get one in person will hurt Amazon, especially if other popular electronics retailers like Best Buy follow suit. It will be much harder to get one in time for the holiday season. This is a perfect real-world example of why a network of “mutual enemies” or competitors is considered to be an unbalanced graph. Amazon refused to comment on the situation, but certainly they’ll find a way to fire back.

 

Sources:

http://www.google.com/hostednews/ap/article/ALeqM5hFZ6VlQscVjVubSZtx5tlcUlP-Aw?docId=493fc49dd42a4287935d17b40ba4b7c2

http://www.reuters.com/article/2012/09/20/us-walmart-amazon-kindle-idUSBRE88J0WA20120920

 

— cuckoo for coco puffs

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