Paint a Target On Your Back

2010 April 23
by Dave

We received confirmation this week that Target will begin selling Kindles  in a small number of stores next week, followed by a wider release at an undisclosed point in time. This is one of those stories that my brain is jumping up and down telling me how important it is, but at the same time, I really can’t pin down why it is such a big deal. So I am going to roll out the things that have percolated to the front of my consciousness during several hours of parallel free association on the subject.

Lets begin with three obvious truths brought to light by this announcement.

First, Amazon wants to sell more Kindles. I hate to sound like Captain Obvious, but this point is the basis for much that follows so I thought it was worth explicitly stating it.

Second, people will be able to easily try one out before they buy. Up until now, if a prospective Kindle owner wanted to see one, they had to sign up to meet a volunteer Kindle owner in a coffee shop. That option sounds socially awkward on so many levels. The Kindle is an amazing device. The screen is fantastic. The weight is just right. It does just what a good font does, disappears while you are reading. This is something that cannot be judged any way other than picking one up and reading a couple of pages. Hence, having one in a retail storefront should bring increased sales opportunities from people who just aren’t sure yet.

Third, production has either been ramped up, or demand has fallen to a point where Amazon can meet increased demand. The most expensive component, and the hardest to manufacture, is the screen. Three years after the product launch, I would be surprised if E Ink is not able to provide more displays at a lower cost. Most likely Amazon has had Foxconn add a few lines and is building lots more Kindles these days.

So what do those things add up to? What follows is pure speculation and wishful thinking on that subject in order of decreasing likely hood.

I am guessing that by this fall we will see a Kindle 2 on display in every Target next to a case full of Kindle boxes. Then in October or November we will get hit with a price drop to reach the magical $199 price point for consumer electronics. Expect Amazon to get more creative with pricing and marketing, maybe bundling with a $50 Amazon gift card, or “preloading” with best sellers.(actually they would just download this week’s best seller list during product setup once you bring it home) Amazon might even go wild and start a prepaid book club and push a book or two a month to your subsidized Kindle. My point is that this demonstrates a strong interest in increasing sales volumes of Kindle. There are lots of creative ways to drive sales and I think that we will start seeing some of them.

Next, what does Target get out of this? Will selling Kindles offset revenue from books? In the long run, this is something that Target needs to do. I know Kindle owners who are avid readers and frequently run out of books they are interested in on their recommendations from Amazon. Amazon is not the best browsing experience if you are a power user looking to stumble on something new. Since they take their Kindles with them everywhere, if they are in Target for something else, they swing through the book section, look at books, and buy ones that interest them on their Kindle. I am sure that executives at Target sit around watching security camera footage of people in the book section with their Kindles out. Target needs to gain experience in selling digital content in store before the same thing starts happening in the movie section with iPads.

So I think you will see a kiosk where you can scan a book and it will print out a gift card with a code that you can type into the Kindle store. This will be activated at check out and be available for download immediately. Target and Amazon may come up with some other way to do this, but some method enabling Target to move into the digital goods game seems like a reasonable move.

Finally, I wouldn’t be surprised if there were some secret plan to strike an unexpected blow against Apple in retaliation for the e-book pricing flap that came with the announcement of the iPad. Maybe being able to bring music CDs to the same kiosk and get a download card from Amazon’s online music store. Maybe something bigger.

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