We provide our first update to our early November commentary reflecting on the holiday fueled fulfillment battle of Amazon’s Kindle Fire vs. the Barnes and Noble Nook Color.  Both e-readers were expected to be one of the hottest selling gift items for the 2011 holiday season, and indeed they were. While both providers appeared to rise to the challenge of supporting consumer fulfillment needs, each ran into some difficulties. Overall, it appears that Amazon has initially risen to the challenge.

Visibility to these two e-reader offerings stems from the acceptance by consumers of an alternative to Apple’s highly popular, but more expensive iPad E-reader. The battle of e-reader market presence is a high stakes one and includes the broader implication of a mass of installed devices that become conduits for very profitable content sales for years to come.  Thus, the supply chain strategy is one of supporting volume, and as pointed out in our initial commentary, sacrificing some margin on hardware for the broader implication of future recurring sales of electronic content.

For its part, Amazon was not shy in hyping the success of the Kindle during the holidays. While not disclosing a specific number, Amazon did disclose that customers purchased well over one million Kindle devices per week with all three members of the Kindle e-reader family holding the top three slots on the Amazon.com best seller list. The Kindle Fire was noted as the number one best-selling, most gifted and most wished product on Amazon, since its introduction just before the holidays.  You gotta just love the power of web analytics!  As to the strategy of leveraged content sales, Amazon reports that Christmas Day was the biggest day ever for Kindle book downloads.

All is not completely rosy and as is the case with new products that may have been rushed to market, there are reports of some quality problems among early Kindle Fire users. A New York Times article published in mid-December(paid subscription or free metered view) notes customer complaints related to lack of external controls, other than the on-off button, web pages that are slow to populate along with concerns for overall security and parental  controls.  A similar mid-December commentary published in the International Business Times notes the top ten problems concerning the Fire, again reinforcing these same issues.  The Mobile Gadgeteer featured on ZD Net recently notes a more troubling problem related to random freeze-ups of the device with the need for a hard re-boot that can cause the loss of some existing content.

For its part, Amazon is demonstrating a proactive response to customer feedback and concerns offering lots of helpful hints or advice for remediation.  There is also speculation that Amazon will provide some form of an upgrade in the early spring.

Today, Barnes and Noble announced that Nook sales surged 70 percent during the holiday season with better than expected sales of the Nook Tablet as well as associated electronic content. However,  a breaking news article published by the Wall Street Journal (paid subscription or free metered view) quotes B&N as noting that it had “overanticipated the growth in consumer demand for single purpose black and white reading devices this holiday” and incurred significant expenses in advertising and promotional support. In our minds, that translates to significant missed forecast of anticipated demand. Once more, B&N disclosed that it is exploring options to separate its Nook business with strategic partners.

There will certainly be more detailed information over the coming weeks including news from Apple on holiday sales related to holiday sales of the iPad.  In its quest to provide a lower cost, reasonably featured e-reader, Amazon may well encounter more consumer feedback in the coming weeks.

From the information thus far, it would appear that the fulfillment battle of Kindle vs. Nook is leaning more toward the former in terms of order volume penetration and supply chain responsiveness during this past holiday season. Supply Chain Matters will feature more follow-up commentary in the coming weeks.

Bob Ferrari

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