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Amazon's Kindle Fire Could Burn Small Retailers

The online giant has unveiled its $199 Kindle Fire tablet. But small retailers beware: This new tablet could turn up the heat on your sales.

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Amazon.com is unveiling the latest entrant in the tablet field dominated by the Apple iPad: the $199 Kindle Fire. But small business owners should be aware this new tablet has the potential to disrupt retail sales.

Here are the details released at the big press event in New York this morning: The Amazon.com tablet will feature a seven-inch display and will run software based on Google's Android operating system. It won't look much like the Android devices you may have seen on various smartphones; Amazon has reportedly customized the interface to a significant degree.

The tablet will be Wi-Fi only and will not have a camera or microphone. 

The lack of these features is likely a way to keep the cost down. At $199, the Kindle Fire will be much cheaper than the entry-level iPad, which runs $499.

But there's another reason Amazon.com wants to keep that price low. The company clearly wants to use the device as another gateway to connect customers with its vast online retail business. 

In fact, it would not be surprising if Amazon.com initially takes a loss on its Kindle Fire sales, but that would be okay if the company's bet pays off. That's because the Kindle Fire is geared not only to run apps, provide information, and let users play games. It's also intended to make it very easy for users to shop Amazon.com.

From a marketing standpoint in the tablet space, it's an interesting play. The iPad has held off all newcomers -- RIM's PlayBook, Motorola's Xoom, and Samsung's Galaxy Tab have all sold abysmally -- and even killed off HP's TouchPad in August, only a month after the ill-fated product was released.

But the Kindle Fire will have something that even Apple does not: The capability to sell stuff.

Sure, Apple sells books, music, and video, just like Amazon.com. But Amazon.com also sells electronics, housewares, clothing, and a wide variety of other merchandise that Apple simply does not (and should not) carry. If the Kindle Fire helps drive more sales of the entire Amazon.com merchandise catalog, then any loss the company might take on this new tablet will be well worth it.

This is why the price is so low and why Amazon.com will offer new Kindle Fire owners a 30-day free trial of Amazon Prime, Amazon.com's membership service that provides streaming video and (ahem) free two-day shipping. 

This is why retailers should pay careful attention to the Fire's fortunes. If it's successful, it could change the way customers do their shopping. Already, smartphone owners can scan barcodes of a store's merchandise and see if there are any less expensive versions of that product being sold elsewhere. It's not clear how many of these "price checks" are converted to actual sales, due to a number of factors: extra shipping costs, lack of availability, having to drive across town just to save a couple bucks, and the small size of the phones themselves are all cited as reasons why purchase rates on smartphones aren't that high.

But imagine a Kindle Fire device that could find an item sold in your store (it can't scan, remember, there's no camera) and immediately take the shopper to Amazon.com's page for that item. Amazon Prime members will get free shipping, and if the item costs enough, every shopper would get free shopping anyway.

Yes, this is something that could happen now with smartphones, but it is very likely that Amazon.com will streamline the process in such a way to encourage more sales for them -- and fewer sales for your business.

Amazon has done it before. Consider the popular listening app Shazam. If I hear a song on a store or restaurant PA system I like, I can use Shazam to listen to the music and identify the song by title and artist. And, if I really like the song, there's a button I can use to buy the song instantly from Amazon.com and have it downloaded to my phone.

The ability to offer users a streamlined shopping experience is the way Amazon.com plans to differentiate itself from the iPad. But that same approach means brick-and-mortar retailers should be very prepared to have even more competition from Amazon.com, if the Kindle fire turns out to be a hot item.


Brian Proffitt is a veteran technology journalist, analyst, and author with experience in a variety of technologies, including cloud, virtualization, and consumer devices. A part-time adjunct instructor at the Mendoza College of Business at the University of Notre Dame, he can be followed on Twitter @TheTechScribe and Google+ at +Brian Proffitt.

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