Amazon is banking on a 10-inch tablet to gain market share, but it may be too little, too late, as the Kindle continues to lose its footing.
Kindle sales slowed this quarter, according to IDC, partly due to a drop-off after brisk holiday business, but its lackluster performance may hint at trouble on the horizon for Amazon as customers continue snapping up iPads.
Target announced it will not sell Kindles starting this spring, another hit for the company, as it was the third-largest Kindle retailer. The retailer's announcement is a double blow to Amazon, following news Apple is launching mini-stores in the popular big-box store.
The Kindle sold well as a Christmas gift, but Amazon is having a hard time keeping sales steady as competition in the tablet market increases. The debut of the new iPad likely cut into Kindle sales, as did a strong entry into the tablet market by smaller rival Barnes & Noble.
Amazon has a hard road ahead, because in addition to its sales decline, research shows customers prefer the iPad to the Kindle, despite the price difference. Budget-conscious shoppers took a chance on the Kindle and picked it up as a gift, but the lukewarm consumer response suggests buyers bit the bullet and paid more for a tablet that performs better.
Amazon is prepping a 10-inch version of the Kindle Fire set to move into Apple's turf. The company is also testing an in-app purchasing system, looking to boost revenue and offer better apps. Amazon's decision to make its tablet bigger and give it more apps demonstrates the company's wish to be more like the iPad, but unless it successfully explains what makes the Kindle unique, it will have a hard time grabbing back its corner of the market.
Unless Amazon can rectify some of the issues plaguing the Kindle -- such as a lack of camera and poor battery life, among others -- while keeping an appealing price, business will continue to spiral downwards.
Amid the gloomy news, Amazon does have a concrete advantage over Apple in one arena: e-books. Apple is embroiled in lawsuits over its e-book pricing strategy, but Amazon is moving in and dropping prices to attract customers. At the same time, Amazon faces problems of its own if antitrust investigators find its pricing is too low for rivals to compete.
The Kindle's sales slump should have Amazon worried, and if the upcoming 10-inch version flops, it will have a difficult time re-proving its worth to consumers.