May 7, 2012

As Kindle Fire sales slump, analysts wonder what’s next?


The Kindle Fire released late last fall to robust sales despite lackluster reviews. The sales were strong enough to land Amazon the spot as the second bestselling tablet behind the Apple iPad.

All of that changed in the first quarter of 2012. The entire tablet market shrunk, which is to be expected after the holiday season, but no one fell as far as Amazon. The entire market enjoyed a 120% increase over last year, with several previously absent competitors entering and gaining traction. One of these even usurped Amazon’s no. 2 spot.

eWeek cites an International Data Corporation (IDC) report describing the changing market:

Holiday sales present a unique opportunity for most companies, and no manufacturer was immune from a dip in shipments during the first quarter, according to a May 3 report from IDC. However, Amazon’s shipments notably fell from nearly 17 percent during the fourth quarter to just above 4 percent during the first.

Samsung, consequently, grabbed the number-two spot, pushing Amazon to third place.

Apple, meanwhile, shipped 11.8 million iPads during the recent quarter, down from 15.4 million during the fourth quarter. However, the company still managed, with help from others’ losses, to boost its market share from 55 percent to 68 percent.

What is interesting here is companies that enjoyed the most growth, namely Apple and Samsung, are producing higher quality tablets with larger price tags. It would be heartening to see quality begin to drive the market. Not the high price point part, but the part about consumers being willing to ignore slapdash ones like the Fire.

Amazon is not likely to take this sitting down. They plan on releasing an “update” to the Fire very soon and no doubt, whatever improvements have been made, the Fire will be priced to strangle its competition. And competition there will be. Per eWeek:

IDC analysts say the impact that Windows 8 tablets—widely expected to arrive during the fourth quarter—will have on the market is for now unknown. A critical aspect of their ability to get in the way of Android-running tablets will be pricing, which no one is sharing yet.

What is clear, IDC Program Vice President Bob O’Donnell said in a statement, is that things are least going to get a lot more exciting.

“The worldwide tablet market is entering a new phase in the second half of 2012 that will undoubtedly reshape the competitive landscape,” said O’Donnell. “While Apple will continue to sit comfortably on the top for now, the battle for the next several positions is going to be fierce. Throw in Ultrabooks, the launch of Windows 8, and a few surprise product launches, an you have all the makings of an incredible 2012 holiday shopping season.”

What if Amazon has misplayed its hand? What if the long term tablet market battle is about functionality instead of price? Companies like Apple, Google and now particularly Microsoft are working to create a cross-platform operating system linking desktops, phones and tablets.  Outside the irrational crush of holiday shopping, objects like the current manifestation of the Fire seem like obvious gadgetry destined for a shoebox in the closet or garage.


Paul Oliver is the marketing manager of Melville House. Previously he was co-owner of Wolfgang Books in Philadelphia.