By Nikki Baird in Partnership with RetailWire
December 8, 2009
I want a Kindle. I mean, I want a Sony eReader. I mean... ah, forget it. As much as I want to join the digital age of books, I am still on the sidelines, mainly because there is no single standard in eReaders. I’d be limited to one company's library - and I don't want to invest until I know how the battle for format is going to play out. Some pundits point out that this is no different than living in an iTunes world, but I disagree. With iTunes, if I want to rip a CD, I can. If I want to convert an MP3, I can. iTunes may not be compatible with other hardware, but a wide array of music files out there can be absorbed into iTunes.
Not so with eReaders - at least not yet. As the Wall Street Journal pointed out last week, if you buy a Kindle library, you're stuck with the Kindle reader. Same for Sony.
But now there's the Nook, Barnes & Noble's entrée into the eReader space. I think it underscores the challenges - and opportunities - that retailers face in navigating consumer devices. What sets the Nook apart from the other two devices is the store experience. When you're in a B&N store, a Nook consumer has access to the entire electronic library, as well as special offers and coupons, loaded up via the device's wireless connection in the store (which is included).
Now, Kindle is also a retailer-provided device, but Amazon doesn't have any physical locations to tie it into, so it limits Amazon's ability to leverage the Kindle as a consumer-facing device to enhance the consumer's shopping experience in a store. And Sony's device is right out there on par with a cell phone - it's something an enterprising retailer might be able to tap into and leverage, but because they don't control the device, the quality of that experience may be limited.
The flip side is that once you get into providing consumer-facing devices, you suddenly find yourself in the consumer electronics business, even if you outsource it to someone else. It's your brand name on the label after all. Comments to RetailWire, featured below, highlight a lot of those challenges, including basics of forecasting and production.
Personally, I think the concept of the Nook is brilliant, and under-rated for its customer-facing capabilities. The quandary that all retailers face in trying to get in front of consumers during the shopping experience is whether to leverage devices that consumers already have (like mobile phones), or to invest in providing hardware that the retailer controls. The advantage for consumer devices: cheap. But challenging, because you have to play by someone else's rules (carriers or manufacturers), and you can't guarantee a high quality experience. The advantage for retailer-provided devices: high quality, with more control and thus more opportunities to leverage the device. However, it's not cheap. The Nook? It's a consumer-facing device - that the consumer purchases. It has enough value in itself to justify the purchase, but the real value for B&N is an opportunity to create a retail brand experience like no other. Brilliant.
Each business morning on RetailWire.com, retailing execs get plugged in to the latest industry news and issues with key insights from a "BrainTrust" of retail industry experts. Here are excerpts from one of these unique RetailWire online Discussions, along with results from the RetailWire Instant Poll.
RetailWire Discussion: Barnes & Noble's Nook Sold Out for Christmas
Tom Ryan, Managing Editor, RetailWire
What follows is an excerpt from one of RetailWire's recent online discussions featuring commentary from its "BrainTrust" panel of retail industry experts.
Barnes & Noble said on Nov. 20 that its new Nook e-reader was sold out and that new orders wouldn't ship until after Christmas.
A message at the top of barnesandnoble.com's page read, "The hottest holiday gift is out of stock. Order the Nook today to be first in line for the new year." Buyers wishing to give the product as a gift are given the option of having a holiday certificate shipped to the recipient.
The retailer said in October when it introduced the $259 device, its first e-reader, that it would ship its first pre-orders by Nov. 30.
B&N's news came after Sony earlier in the week said it could not guarantee that its new Daily Edition Reader would reach online buyers in time for Christmas, although it has two other e-readers on the market. Amazon controls about 45 percent of e-reader sales in the U.S. with Sony at 30 percent, according to ISuppli Corp.
Amazon had similar out-of-stock issues on its Kindle last year but is expected to benefit since it promises to be in stock this year.
Sarah Rotman Epps, an analyst at Forrester Research, believes both Sony and Barnes & Noble rushed their product launches and neither was prepared to meet demand for the holiday.
"Even without specific problems in the supply chain, the manufacturing process takes time for new products -- it could be three months from the time they place the orders with their factories until they actually ship," Ms. Rotman Epps told The New York Times. "Sony and B&N wanted to show the market they could compete with Amazon for the holiday season. Consumers responded enthusiastically, but unfortunately these companies are struggling to deliver on their promise. Now they have to face disappointed consumers with empty packages under the tree."
Discussion Question: Was it worth launching the Nook if B&N knew it wouldn't be able to meet holiday demand?
RetailWire BrainTrust comments:
B&N made two mistakes: First, it introduced a product that it wasn't prepared to ship until November 30th anyway, according to Tom's article. Second, it failed to forecast demand and will leave thousands of orders unfilled (and probably canceled) for the critical holiday season. These miscalculations play right into Amazon's hands: There are probably plenty of Kindles available for sale, and e-readers are the "gift that keeps on giving" for any company selling books on its own devices.
Amazon took an added aggressive step over the weekend: It sent e-mails to its members (including this writer) offering a free download of Kindle software onto any computer. I now have a Kindle reader as well as a netbook with e-reader capability thanks to the software that I installed. So Barnes & Noble looks doubly foolish trying to rush a product to market, where its two biggest competitors already control 75% of the share.
Richard Seesel, Principal, Retailing In Focus LLC
It was worth it. Both companies needed to make a statement. And did. Rather than leave the e-reader category to Amazon, they joined the fray. This holiday season is going to be messy. Many desired items may go out of stock as retailers cut back their orders and consumers hesitate to spend.
Will some consumers be disappointed? Yes. Will it hurt either Sony or B&N in the long run? Probably not.
Max Goldberg, Founding Partner, The Radical Clarity Group
I completely agree with Max Goldberg's comments.
Even if a sellout was highly likely, it was important for Barnes & Noble to make consumers aware that they have an alternative to the Kindle and the Sony Reader.
It's important to distinguish between those who are purchasing this thing as a gift and those who are purchasing a reader for their own personal use. Gift givers may not be thrilled about the idea of leaving a Nook certificate under the tree, with the promise of delivery in early January. Many will opt to buy the Kindle. Those who are buying for their own use, on the other hand, will probably be more inclined to wait a little and get the reader they really want.
Marshall Kay, Principal, RFID Sherpas LLC
I think it is always great to have a shortage. This means that the demand (therefore creating more demand) is great and that the interest will continue. B&N has an opportunity to use this in a manner that Amazon cannot. We do not know the specifics. Say they have 1,000,000 readers and sold out, then the demand is amazing and they will have spillover. To get to the market in time for Christmas is important, but to completely miss the Christmas holiday would have been a bigger issue.
Mark Johnson, President and CEO, Loyalty 360
Inventory is already being widely reported as problematic in many retail channels, not just at B&N. Heck, we can't even manage the inventory of H1N1 flu vaccine. It's a sign of the times. Classically, Apple knowingly introduced the iPhone with insufficient inventory. And like the Nook, there were plenty of established alternatives to the iPhone at about the same price point. But that didn't matter, and the resulting case history is a fascinating marketing study.
M. Jericho Banks, Ph.D., Partner-Owner, Select Marketing LLC
While B&N may lose some sales to Amazon and Sony due to the inventory shortage, I think the bigger revenue risk for B&N is that the money will get spent elsewhere. Given conservative spending budgets and a desire to have a gift ON the holiday, shoppers who would have chosen B&N over the readers may now choose to spend their money on other items and not jump on the reader bandwagon.
Paul Schottmiller, Director, Cisco Systems
I actually believe that the launch of the Nook this year was a success, even if the company knew that it would be unlikely to be able to meet demand for the holidays. While this approach tends to run counter to traditional customer-centric practices (which I espouse), B&N had to move now for several reasons:
1. e-book readers are the hot product of THIS holiday season. In a season where few other products have any "buzz," B&N had to act now to capture share of voice, if not share of market. Who knows what products will capture consumer imagination 12 months from now?
2. Participating in the e-book market will give B&N additional clout with book publishers, and hinder Amazon's attempt to gain market control.
3. Experience from this holiday season will help the company deal with high-demand for other proprietary products in the future. B&N has now opened the door for additional products they can develop and launch, and the experience will be valuable if not pleasant.
Mark Price, Managing Partner, M Squared Group, Inc.
Read the entire RetailWire discussion:
http://www.retailwire.com/discussions/sngl_discussion.cfm/14150
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