Wal-Mart stops selling Amazon Kindles

Thu Sep 20, 2012 3:40pm EDT

A Walmart store, that was destroyed by a tornado and later rebuilt, is seen in Joplin, Missouri May 17, 2012. REUTERS/Eric Thayer

A Walmart store, that was destroyed by a tornado and later rebuilt, is seen in Joplin, Missouri May 17, 2012.

Credit: Reuters/Eric Thayer

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(Reuters) - Wal-Mart Stores Inc will no longer sell Amazon.com Inc's Kindle eReaders and tablets, severing its relationship with a major competitor and placing a bet that consumers are more interested in Apple's iPad and other gadgets.

The world's largest retailer, which has been trying to catch up to Amazon in online sales, said the decision was consistent with its overall merchandising strategy.

Owners of Kindle tablets such as the new Kindle Fire HD can shop on the devices for millions of items beyond digital books. This allows Amazon to compete with stores on more lines of merchandise. This spring, Target Corp stopped selling the products.

Amazon has already tested physical stores for other goods. Now, with two large chains no longer selling Kindle, speculation has grown that the dominant online retailer could open its stores where shoppers could try out and buy Kindles.

Amazon "is a little bit of a Trojan horse" when the Kindle is sold in other stores, said Sucharita Mulpuru, retail analyst at Forrester Research. "They should have made this decision to not carry the Kindle a long time ago."

The timing of the decision to pull the plug on Kindles, which was reported first by Reuters, means that Wal-Mart will miss out on holiday season sales of the newest Kindle tablets, which range in price from $159 to $599.

"We have recently made the business decision to not carry Amazon tablets and eReaders beyond our existing inventory and purchase commitments," Wal-Mart said in a memo sent to store managers on Wednesday. "This includes all Amazon Kindle models current and recently announced."

A Wal-Mart spokeswoman confirmed the decision and said the company would keep selling "a broad assortment" of other tablets, eReaders and accessories. Amazon declined to comment.

Best Buy Co Inc and RadioShack Corp, meanwhile, said they would keep selling Kindle products.

Amazon wants to get its tablet into the hands of consumers to make it a cash register of sorts, said Scott Tilghman, an analyst at Caris & Company. The case could be made that if Wal-Mart and Target are cannibalizing their own sales by selling Kindle tablets, which allow Amazon to compete with them.

Amazon's margins on selling Kindle are believed to be thinner than those of other gadget makers, in particular Apple Inc. As a result, Amazon may not have much in the way of profits to share with retailers.

"I think part of it could be margin, though the bigger point is that Wal-Mart and Target view Amazon as a competitor," Tilghman said.

Amazon does not disclose the margins on the devices, nor has it said how many it sells versus how many retailers sell.

Amazon's eReaders are the best-selling electronic readers, with the first version of the Kindle Fire tablet grabbing about a fifth of the U.S. tablet market. Amazon launched a range of new tablets earlier this month, some aimed at the top end of the market to compete with Apple's more expensive iPad.

Wal-Mart continues to sell iPads, Barnes & Noble Inc's Nook, Google Inc's Nexus 7, Samsung's Galaxy Tab and other tablets and eReaders.

Tablet owners are most satisfied with Apple's iPad, followed closely by Amazon's products, according to a J.D. Power and Associates tablet satisfaction study released last week.

Searches for "Kindle" on the websites of Walmart and the company's Sam's Club warehouse chain on Thursday brought up items such as cases and screen protectors used with the Kindle, as well as gadgets from other companies.

Shares of Wal-Mart were up 0.5 percent at $74.74 on Thursday afternoon, while shares of Amazon.com were down 0.9 percent at $259.33.

(Additional reporting by Alistair Barr in San Francisco; Editing by Matthew Lewis, Steve Orlofsky and David Gregorio)

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