Amazon Kindle Competitive Landscape

AMAZON KINDLE

PRODUCT PLANNING PORTFOLIO

VAN VUONG

MAYFIELD | SPRING 2010

Van Vuong :: Portfolio Planing S2010 :: Mayfield

PRODUCT LEADERSHIP

OPERATIONAL EXCELLENCE

CUSTOMER INTIMACY

THE COMPANY

Based in Seattle, Washington, Amazon is a global leader in online retail. The company started out in 1995 as an online bookseller but has diversified their offerings to include other products ranging from electronics, clothing, jewelry to toys. Their core-competence is in online retail and providing “consumer-centric” services. Amazon sells products by third parties but also manufactures and sells the Kindle e-reader. The Kindle is the first and only consumer electronic device that carries the Amazon brand.

Amazon offers their customers a personalized shopping experience with their platform and features like Wish Lists and Listmania to help customers find the right product.

PARTNERSHIP

Amazon powers and operates retail web sites for Target, Sears Canada, Benefit Cosmetics, bebe Stores, Timex Corporation, Marks & Spencer, Mothercare, and Lacoste. They have also run in to legal problems with partnerships in the past with Toysrus.com.

Amazon provides customers with a wide selection of products and customized services with the partnership of individuals sellers, retailers and software developers.

• Provides platform for retailers and individuals to sell products

• Partners with big name retailers to offer technology services, merchandising, customer service, and order fulfillment.

• Provides platform for independent software developers to build profitable applications and services for Amazon customers

“Earth’s Most Customer-Centric Company”

Amazon.com

COMPANY OVERVIEW


COMPANY OVERVIEW

Amazon Kindle Strengths

+ Amazon is the largest online retailer

+ Amazon has developed services that personalizes the online shopping experiences. ie recommendations, reviews, wish lists and suggested products

+ Partnerships: nation’s biggest book sellers, has been able to convince most major publishers to release titles for the Kindle

+ Kindle has brand recognition

+ downloads content over “Whispernet”, a free EV-DO wireless service on the Sprint Nextel network. Service does not require monthly fees

+ high-contrast screen does a great job of simulating a printed page

+ l arge library of tens of thousands of e-books, newspapers, magazines, and blogs via Amazon’s familiar online store

+ no PC needed;

+ Features: built-in keyboard for notes; SD card expansion slot; compatible with Windows and Mac machines.

+ users could start reading on a Kindle device and continue from the same spot on their cellphones

+ 6-inch Kindle is substantially lighter than the iPad, weighing two-thirds of a pound rather than 1.5 pounds

+ uses e-ink, much easier on the eyes than an LCD and better for reading in sunlight

Amazon Kindle Weaknesses

- Dependence on partnerships sometimes presents a strategy mismatch. Amazon relies on vendors to allow their prices to be low. As a retailer they have run into a mismatch of strategy with publishers who have resisted to lower digital book prices.

- Design and hardware design is not developed

- Non-availability of WiFi functionality

- provide a large amount of geographical coverage, but also drives the price of the device up

- Design is ergonomic, but not very elegant

- pricing for nearly all the content seems too high, especially considering the periodicals and blogs are available for free online

- black-and-white screen is fine for books, but less impressive for periodicals and Web content;

- lacks a true Web browser

- included cover is clumsy and poorly designed

- additional file formats need to be e-mailed to Amazon for conversion

- Kindle DX, which has the same screen size as an iPad, is only $10 less while lacking a majority of its rival’s features

Threats

- Other classes of devices that have same functionality with added features

- Cost of digital books are still too high

- Publishers refuse to lower prices. There is a constant battle with keeping prices low

- Other substitutes sold at lower prices

Opportunities

- Amazon has opportunity to leverage social networking with addition of Facebook and Twitter upgrades

- There is an opportunity to innovate the digital distribution model

- Expand offering into other digital markets like video, games and apps

- More partnerships with retailers and businesses


CONTEXT OF MARKET:

Amazon Kindle is a leader in the e-book market (devices dedicated to reading). Electronic readers such as the Kindle, Barnes and Noble’s Nook and Sony’s ebooks have risen in popularity in the past year and have been a popular gift item in the recent holiday season. E-books allow consumers to download and carry multiple books, magazines and newspapers on a compact, convenient device. The price of e-books are generally lower than the physical books, which is an incentive for avid readers. Many e-book devices use e-ink which allow the interface to be less stressful on the eyes.

Recently with the introduction of the iPad, many experts suggest the price of e-readers may be a major contributor to whether they survive or not. To compete with the competition, e-reader companies are starting to increase channels of distribution. Amazon is starting to sell Kindles at brick-and-mortar stores, beginning with Target stores and the Nook will be sold at Best Buy stores.

COMPETITION

• Google Android Operating System with touch screen color navigation but more complex user interface

• Ability to lend and borrow books for free with LendMe. Allows book buyers to loan downloads to friends for 2 weeks – accessible via smartphone or computer

• Offer both 3G and Wi-Fi, supports downloads via both connections, Wi-Fi is currently limited to Barnes and Noble stores.

• Supports ebooks, images and audio files from Barnes and Noble, Google Books, Fictionwise and eReader in EPUB, PDB and PDF formats, as well as JPG, GIF, PNG, BMP and MP3 formats from additional sources.

retail price: $259

• Sleek design and touch screen interface

• Uses E-Ink but still has glare because it is touch screen- text is not as crisp and poor contrast

• Touch screen interaction requires more pressure and also utilizes a stylus

• Has the ability to hold 350 books with ability to expand with sd card

• Supports Microsoft Word documents, Adobe PDF documents and a few other text document formats

• Supports MP3 and MP4 audio files so you can carry along some music or audio books

retail price: $199-399

• The iPad is in a different class of devices than e-readers. It is a personal computer and multi-functioning device.

• Measures 9.7 inches, the iPad is larger than most e-readers and supports full color photos and web pages

• Uses an LCD screen and LED backlighting so this produces a glare and is less comfortable to use than e-readers with e-ink technology

• Like other Apple devices, the iPad has multi-touch screen technology allows users to zoom, flick and navigate with accuracy

• Supports Wi-Fi, Bluetooth and 3G connectivity

• Comes with 16G, 32G, or 64G storage

• Uses iBooks app to purchase books directly to your iPad from the iBookstore. Amazon also has an application for the iPad

retail price: $499

MARKET OVERVIEW

CURRENT POSITION

GROWTH DECLINEINTRO MATURITY


Large format- ideal for newspaper display

Regular format- books

On-line retail platform (physical books)

Personal computer platform

Mobile device platforms

Kindle on Blackberry

Kindle 2Price: $259.00 Display: 6” diagonal E-Ink Size: 8” x 5.3” x .36” Storage: 1,500 books

Kindle DXPrice: $489.00Display: 9.7” diagonal E InkSize: 10.4” x 7.2” x 0.38”Storage: 3,500 books

Kindle on iPhone

Kindle on PC

Kindle on Mac

Physical books though Web Portal for online retail

Kindle on tablet/iPad

Platform for Kindle Books (software) Amazon Products (hardware)Online retail

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Kindle (First generation resale only)Price: $199.00 used Display: 6” diagonal E-Ink Size: 7.5” x 5.3” x 0.7”

PRODUCT PORTFOLIOAmazon began as an online bookseller and they continue to provide customers with the best costumer reading experience. Their portfolio covers multiple platforms to help readers search, buy and read books with a very personalized buying experience. Along with their online retail bookstore, customers can also purchase and read Kindle books through the free reading apps for personal computers, mobile devices, tablet computers and e-readers.

CHARACTERISTICS+ Lightweight design+ Paper-like displays+ Instant access to large

collection of e-books+ Applications available for a

range of devices

THEMES+ Multiple platforms+ Mobility+ Simplicity+ Access

PRODUCT PORTFOLIO

$ 500

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CUSTOMER SEGMENTATION

LEISURE READERS

Adult male or female 35 - 45

mid to high income

The leisure reader enjoys collecting books and reading as many books that they have time for. Being able to carry many books around is a plus.

- Large selection of books and immediacy of new books

- A lot of storage space

- Low prices so they can purchase many

- Customized search to match personal interests

UNIVERSITY STUDENTS


low income

Students need books for specific occasions - when course require them. Physical textbooks are expensive but allow them to return them and get some cash back.

- Ability to run on different platforms and file format is important

- Access to textbooks and course materials

- Lightweight

- Low prices

- Style and design

- Speed of access

TRAVELERS AND COMMUTERS


mid to high income

The business traveler reads when they are waiting during travel. They need access to reading material in a wide range of locations and sometimes at unexpected times.

- Ability to connect at all locations

- Speed of access

- Lightweight

- Large selection of periodicals and news

NEWS FANS


mid to high income

They love to be on top of the latest news. The ability to search for news that is relevant to them is very important.

- Availability of news selections

- Searchability of relevant news and personal interest

- Speed of access

- Lightweight

- Large format of device

NEEDS AND VALUES

OCCASIONS Travel time and Leisure time During travel periods

PROFILE

ABOUT THE CONSUMERS

The Kindle is a niche device, but this small market loves their books. A large percentage of the kindle books are bought by a small number of readers. “The Kindle must have an enormous penetration of what is a very distinctive, and for Amazon, quite lucrative, segment: very heavy buyers of books.” The kindle especially appeals to heavy readers who like to travel or just move around town without the weight of several books. Their consumers are also students and news fans, both of whom value different functions, such as design and connectivity more than book readers. Currently princes for the Kindle and Kindle electronic text books remain too expensive for many college students.

Leisure time During school years


COMPETITIVE LANDSCAPE

Nook

Sony e-reader

Kindle

mp3 player

cell phones

ipods

ipadHDTV

Wii

Nintento 360

Playstation

CDs

Netflix

Public radio

Acedemic Journals

Research

Publications

Text books

Software Programs ie. Turbo Tax, Quicken

Books

News television

Newspaper

Magazines

Cable television

Theatre

DVDs

Libraries

Projector

electronic dictionaries

Desktop computers

iphone

laptops

blackberry

portable dvd players

Entertainment and Fun

Work and Education

Personal Growth and Interests

A NICHE MARKET WITH OPPORTUNITIES

Currently the Amazon Kindle provides products and services for a very niche market, heavy readers, but the platform could potentially reach a wider market in digital content retail. Amazon has been a leader in online retailing and have provided customers with customized online shopping experience. With the capabilities of the Kindle as mobile platform, Amazon has opportunities to reach wider markets than just books, including products in entertainment, personal interests, education and work. Similar to the way Amazon’s online retail platform has evolved into various markets, their hardware platforms may follow in this path.

FORM Electronic readersElectronic books make it possible to carry a large collection of books in a compact mobile device and also be connected to a book retailer for easy access to a great selection of digital content.

CATEGORY Hand held computersHandheld devices such as smart phones and tablet computers are in a class of there own and multipurpose devices, but they have become direct competitors to the e-book market.

GENERIC Digital entertainmentThe technology in digital entertainment has increased in the past years and the ability for them to be wireless and connected to the internet has also changed the way users receive digital content.

BUDGET Media and communication providersMedia comes in various formats. They ability to receive information for entertainment, personal growth, work and education comes in traditional forms of books and physical content.


PORTFOLIO OPTIONS

EXTEND

A Children’s Line - develop kindle version for children’s books with tools to help children read (might require color)

B Educator’s Tool - create system for educators to curate content for students and allow students to purchase Educators packaged books and materials

C Sleeker Style - Design more attractive electronic reader and target style conscious users who care about aesthetics.

PENETRATE

D Add WiFi - Currently the 3G browser has limited connection to a select few websites. Allowing wifi and developing a robust browser with e-ink could be valuable and very desirable to existing markets

E Lower price of Kindles - current competition of other devices with similar attributes but also additional functionality may be a threat to the Kindle because they are at similar price points, by lowering their prices Kindles could help make Kindle the desirable choice

F Incentive Program - for frequent readers, offer incentive programs that give users discounts or free offers with frequent purchases to maintain loyalty

EXPAND

G Library Loan System - With membership fee, allow access to select collection of reference books through kindle

H Shareable and Sellable e-books - create exchange accounts for users to buy and sell e-books to each other (might require them to modify file security technology of e-book files and other digital files)

I Partnership with other services - With the ability to use Facebook and Twitter, Amazon might partner with other online services to expand their social networking services on the Kindle

J Expand platform to other devices- Currently the kindle platform is available on multiple devices, but by going beyond just digital books, they may be able to expand into other devices such as tvs and game consoles.

K Add color features to be competitive with other devices with similar price points add color interface to display full color publications and colorful images

INNOVATE

L Digital shopping companion use to instantly purchase products user might see on tv, magazine, or at a friends house. Use context awareness and visual recognition technologies to search and buy products

M Tablet computer with e-ink display basic functions of tablet computer, internet applications with friendly display

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EXTEND

A) Children's Line 1 1 4 1 7 4 18 11

B) Educator's tool 4 7 4 4 7 4 30 8

C) Sleeker Style 9 7 7 1 9 4 37 5

PENETRATE

D) Add WiFi 9 9 9 7 9 4 47 2

E) Lower price of Kindles 9 7 9 7 9 9 50 1

F) Reader Incetive Program 4 4 7 7 7 4 33 7

EXPAND

G) Library Loan System 4 7 4 4 4 1 24 10

H) Shareable and Sellable e-books 7 4 7 7 1 9 35 6

I) Partnership with other services 7 7 7 9 4 4 38 4

J) Expand platform to other devices 7 7 4 9 4 7 38 4

K) Add color features 9 7 9 7 9 4 45 3

INNOVATE

L) Digital Shopping companion 7 7 4 9 1 7 35 6

M) Tablet computer with E-ink display 4 4 7 4 1 7 27 9

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OPTION EVALUATION

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GOAL:

Maintain leadership in the Kindle retail platform by improving user experience, lowering barriers to digital retail channels and increasing options for purchasing digital products, with the goal of increasing Kindle platform retail sales by 30%.

OPTION EVALUATION


RECOMMENDATION #1

Lower prices and expand product offerings Currently new products like the iPad poses a threat to the Amazon Kindle. Although these products might be in a different class of devices, they still have the same functionality as the Kindle with additional attributes that the kindle lacks like color and wifi. Even though the Kindle is the best in the class of digital reading devices, the iPad and other readers have added features and functions at not that much of a price difference. Adding a new product to the portfolio with competitive attributes and added functionality and also lowering the prices of the current devices could help the Amazon Kindle stay ahead of the game. By lowering prices of the devices, they might become more affordable and penetrate the student segment of the e-book market. In addition to lowering prices and adding an offering with advanced features, Amazon should continue to stay on top of software updates and added features that other devices may or may not have, but also create unique offerings for the Kindle. Free 3G service does set them apart from other devices and they should leverage this and other partnerships with online services and retail outlets to make this a more desirable feature.

STRATEGIES

1) Add new product with added features- color and wifi

2) Lower prices of current black and white

3) Continue to upgrade services and increase partnerships with online services

4) Add unique capabilities to new product to set precedence for the retail of digital content (Possibly leveraging free 3G services).


New format with color and wifi







Kindle 3Price: $359.00 Display: Color touch screen Size: 8” x 5.3” x .36” Storage: 2,000 books


Kindle on iPhone

Kindle on PC

Kindle on Mac





$ 500

$ 400

$ 300

$ 200

$ 100

$ 0

RECOMMENDATIONS



RECOMMENDATIONS

RECOMMENDATION #2

Focus on expanding platforms and customize retail experienceAmazon has revolutionized online retail services and is currently a leader in this industry. Device platforms like the Kindle is an opportunity for Amazon to flex its innovative muscles and transform the way people buy and possible sell digital content. Their strength in customizing consumer’s experience could be leveraged to create product and service platforms on more digital devices. Their current and future partnerships with other services and products could also be valuable in the development of these platforms. Currently they have expanded the kindle e-book platforms to blackberries and other smart phones, laptops, ipods and tablet PCs. They are also on their way to integrate social networking services like Facebook and Twitter on the Kindle. This is just the start. Focusing on expanding device platforms and customizing the retail experience by developing products and services for more hardware devices and leveraging their partnerships could help the growth Amazon.

STRATEGIES

1) Leverage social networking features and expand services

2) Integrate Amazon software into more device platforms (tvs and game consoles?)

3) Increase partnerships with online services

4) Develop profitable models for retail of digital products and services that might be desireable for buyers and sellers









Kindle on iPhone

Kindle on PC

Kindle on Mac





$ 500

$ 400

$ 300

$ 200

$ 100

$ 0

additional device platforms


http://www.amazon.com

http://reviews.cnet.com/e-book-readers/amazon-kindle/4505-3508_7-32751890.html

http://www.electronista.com/articles/10/04/13/amazon.may.need.major.changes.to.compete/

http://www.marketwatch.com/story/amazon-shares-could-be-busy-in-late-trades-2010-04-01?reflink=MW_news_stmp

http://bits.blogs.nytimes.com/2009/05/06/how-the-kindle-let-amazon-make-a-lot-from-the-few/

http://topics.nytimes.com/top/reference/timestopics/subjects/k/kindle/index.html?scp=1-spot&sq=kindle&st=cse

http://abclocal.go.com/wls/story?section=news/consumer&id=7378445

http://blogs.zdnet.com/BTL/?p=32201

http://www.businessweek.com/technology/content/may2009/tc2009054_280910.htm

http://www.businessweek.com/investor/content/feb2010/pi2010028_121302.htm

http://blogs.forbes.com/velocity/2010/03/26/forget-apples-ipad-amazons-kindle-will-have-a-great-year/

REFERENCES

Amazon Kindle Competitive Landscape

Business

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