Despite the market dominance of Amazon, other retailers are increasingly making a play for a slice of the fast-moving ebook and ereader markets.
The fight will not just be about hardware but about the digital products sold through them and, despite the power of the pair, retailers of all sorts are making a play for share of both the ebook and ereader markets.
Other retailers are entering the ebook and ereader market too. US bookseller Barnes & Noble is to launch its Nook device in the UK in the autumn, selling through John Lewis, Foyles, Argos and Blackwell’s. Waterstones has struck a partnership with Amazon while WHSmith is pushing Kobo – the new Glo and Arc models were also showcased last week.
“The market is phenomenally fast-moving,” says consultancy Ecommera director Michael Ross. However, he believes that not all the initiatives in the market will be successful. “When you’re trying to out-innovate Amazon, good luck because it’s the master of innovation,” he cautions.
Sainsbury’s bought HMV’s 64% stake in Anobii in June for just £1, in order to bolster its online Sainsbury’s Entertainment business, which launched in 2010 and includes a video streaming service and music downloading.
Anobii enables readers to research titles and purchase them to read on a range of ereaders, smartphones and tablets. It also doubles as a social media site where readers can rate, review, share and discuss their choices with other members. It has more than 600,000 users worldwide and a library of more than 60,000 ebooks.
Sainsbury’s head of digital entertainment Mark Bennett says it has pushed into such categories to ensure it remains relevant in the marketplace.
“We are already a relatively big player in entertainment and our customers buy lots of books, films, CDs and games from us,” says Bennett. “Digital is still relatively small and growing quickly, so there is plenty of opportunity.
“We feel our large weekly footfall and customer database gives us an edge. Using this data we feel we can offer our customers a more compelling service than some of these competitors.”
Bennett said Sainsbury’s has no plans to launch its own ereader. “We believe customers increasingly want to be able to read their books on their tablets and smartphones, rather than dedicated ereaders,” he adds.
In fact the latest ereaders are moving into tablet territory, as the Kindle Fire and the Kobo Arc bridge the gap between the ereader and the tablet. Such tablets are not seen as being as advanced as Apple’s iPad, but it is clear there is scope for ereaders to move much closer to tablets.
Tesco’s Mobcast purchase brings another dimension to the grocer’s online entertainment offer, following its acquisition of film and TV streaming service Blinkbox in 2011 and internet radio service WE7 earlier this year.
Mobcast is a cloud-based service with more than 130,000 books that, like Anobii, can be read on smartphones, tablets and ereaders.
Planet Retail analyst Lisa Byfield-Green says: “The digital race is on and retailers are starting to recognise the amount of value online. Physical sales of entertainment are declining, so I think retailers of these products are looking to make money online.
“But lots of the supermarkets aren’t sure what to do with the platforms. They are working on how to replace the physical space in store.”
Despite making acquisitions such as Anobii and Mobcast, Ross believes the supermarkets will find it difficult to compete in a market dominated by Amazon’s ebook offer and Kindle ereader, estimated to account for between 60% and 90% of ereader market share in the US.
“When you think of the market, you need to separate the hardware from the software,” he says.
“The reality is that life is going to be pretty difficult for the supermarkets. Amazon has a huge brand advantage across both its hardware and software because it was the first to market and has built its brand. I’ve never met anyone that has bought an ereader that isn’t a Kindle.”
Ross explains that the model for ereader manufacturers can be to profit from the content sold and not from the device itself – the device, like tablets, in effect becomes a portable device from which to make sales.
“Players are massively subsidising their hardware so they can sell it at a low margin and then sell the content,” he observes.
Byfield-Green suggests the supermarkets may attempt to compete on price, or even offer bundling deals rewarding customers with vouchers for digital content when they buying a certain level or groceries.
“Things then start to get interesting,” says Ross, “because they will be wondering: ‘How do we buy market share?’ If they have to do that then it’s about customer retention. It would be tricky to subsidise.”
Although the grocers have an opportunity as a result of being able to sell content across devices, could their lack of proprietary hardware be a problem?
“There are really good opportunities in digital books. For the supermarkets they will be a very small part of their offer,” says Byfield-Green.
But Ross maintains: “The new Amazon Paperwhite model is unbelievable. It is reinventing display technology and this improvement in technology is relentless. If you want to play in the market, you need deep pockets and huge commitment.”
That is partly why some retailers, such as Waterstones and WHSmith, have teamed up with suppliers such as Amazon and Kobo.
A Waterstones spokesman says: “We are a bookseller, and our job is to sell books to our customers in whatever format they like – therefore we need to be selling digitally.
“It became obvious that Kindle is the market-leading device and the best device out there. We want to offer the best to our customers, which is why we are selling Kindle, but in a Waterstones way.”
Waterstones is preparing to sell the new Kindle Fire when it launches in October by opening special areas, installing wi-fi and training staff so that they can assist customers in setting up their devices.
Despite the already huge online take-up of Kindles, Waterstones believes customers will still be keen to shop in stores.
“We believe we add the bookshop experience to buying and subsequently using Kindle. The best place to buy books is still a bookshop,” the spokesman says. “People will be able to have the best of both the physical and digital worlds, browsing in a range- holding bookshop, with knowledgeable, helpful staff, events programmes and coffee shops.”
WHSmith launched its Kobo partnership last year and is opening 100 Kobo shop-in-shops which, like Waterstones, will offer free wi-fi and specially trained staff to provide assistance and advice.
But Ross maintains: “WHSmith is not known for books any more. It’s done a brilliant job of turning itself around but in doing so it has lost its association with books. The Kobo is a very niche player in the market.”
Even Barnes & Noble’s device may fail to generate a big following, Ross fears, despite its popularity in the US. He says it is unlikely those people who already have a Kindle will swap their device, while brand awareness is low in the UK because there are no stores here.
But retailers themselves may be more sanguine about the opportunities open to them. Although he declined to comment on the detail of Sainsbury’s digital books offer before the full launch, Bennett says: “Digital is growing rapidly and our customers are not going to stop consuming entertainment. We see our stores as important assets that can complement our digital proposition.
“We’re working hard with our partners to make sure we can offer an integrated multichannel approach to selling books, both digital and print.”
Amazon has undoubtedly blazed a trail in etail widely and the creation of ereaders, but the intense activity of rivals shows the conviction that there remains room in the market for plenty of competition.
Tablet wars - Kindle Fire vs the iPad
The level of media attention generated by Amazon’s Kindle Fire update might be comparable to Apple’s own hyped launches.
In terms of price the Kindle Fire HD – which will be priced at £159 – is more in line with tablets at the cheaper end of the spectrum, such as Google’s Nexus 7, which sells for £199 for a 16GB model.
Despite its cheaper price, its specifications are still impressive when compared with the iPad’s (see below). However, fans of the Apple brand are prepared to pay more for the distinctive look and feel of its products as well as technical qualities. And the iPad not only looks snazzy but also has a high resolution screen. Sales wise, Amazon still has some way to go in its battle with Apple. Research firm IDC reported in August that Apple’s share of the global tablet market in the second quarter of 2012 was 68.2%, compared with Amazon’s 5%.
Tom Mainelli, research director of Mobile Connected Devices, says iPad growth shows no sign of slowing. He notes: “The majority of consumers continue to favour the iPad over competitors, and Apple is seeing increasingly strong interest in the device from vertical markets – especially education.
“While iPad shipment totals are beginning to slow a bit in mature markets where the device saw early traction, growth in other regions is clearly more than making up the difference.”
Which is not to say Amazon isn’t a threat. It continues to work hard to make it as easy as possible for its tablet users to buy content from its ever-expanding ecosystem of books, films and music, and the lower price point will appeal to consumers. Amazon’s trusted brand is a bonus too – shoppers are generally confident in its products.
Amazon’s achievements over the past decade were unexpected, and almost unrivalled. The Kindle Fire may not beat the iPad in sales volumes soon but Apple executives will be keeping a close eye on it.
Kindle Fire HD
- Price £159 for the seven-inch Kindle Fire HD and £129 for the more basic Kindle Fire
- Operating system Android 4.0
- Processor Dual-core processor which runs at 1.2 GHz
- Display Initially at 1280 x 800 resolution with a seven-inch screen
- Memory Not yet known but expected to be about 1GB of RAM
- Storage 16GB or 32GB
- Price £329 for a 16GB version.
- Operating system iOS version 5.1.1
- Processor Dual-core processor which runs at 1GHz
- Display The retina display screen has a resolution of 2048 x 1536 with a 9.7-inch screen
- Memory 1GB of RAM
- Storage Up to 64GB