The Real Reason Amazon's Tablet Will Be a Winner

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The (Nasdaq: AMZN  ) tablet has been officially unveiled, largely confirming most pre-release speculation. Will it dethrone Apple (Nasdaq: AAPL  ) and its dominant iPad? Whether you think the Kindle Fire is going to be a major player or just another also-ran in the Android tablet sphere, its attractive price point alone should shake up the market. It's easy to focus on hardware market share, but what if that's not Amazon's first priority? What if, instead, Amazon has identified a nascent trend in online shopping and is positioning itself to take home the lion's share of its spoils?

Click, click, buy
The Kindle Fire has been called an iPad killer and (slightly less often) a Netflix (Nasdaq: NFLX  ) killer. But it might become an eBay (Nasdaq: EBAY  ) killer as well. Amazon's sales have increased tenfold, and eBay's elevenfold, in the past decade. However, Amazon has poured on the growth since 2008, while eBay seems comparatively stuck in place. One of these companies is positioning itself to take over mobile shopping, and one is not. You already know which one I'm talking about.

Shoppers are becoming more mobile, and tablets are fast becoming the storefront of choice. A recent Wall Street Journal piece offers a few intriguing figures:

  • The conversion rate (how many e-commerce site visitors will order something) is higher on tablets. PCs convert about 3% of visitors to buyers, but tablet visitors have 5% conversion rates. That's 20,000 more buyers out of every 1 million visitors.
  • Tablet users might have an order worth 20% more than a comparable PC or smartphone buyer.
  • The U.S. e-commerce market was worth $150 billion last year, but mobile users accounted for only 3% of the total.
  • Of the 9% of online shoppers who own a tablet, about half use the device to shop online. Imagine how much higher this figure could be if Amazon's device gains broad acceptance.

Your one-stop shop
The trend toward mobile shopping is one that will be important to Amazon's bottom line, and I believe that is one major reason the company is pushing so hard to make its tablet competitive. Amazon has already redesigned its homepage to take advantage of tablet-scale interfaces. Unless e-commerce competitors eBay and (Nasdaq: OSTK  ) convince tablet manufacturers to preload their apps, expect a gradual slide into mediocrity and irrelevance.

What about Barnes & Noble (NYSE: BKS  ) ? Well, it was nice knowing you.

The battle isn't over yet, so why not add these companies to your watchlist? There's bound to be a flood of important news between now and the Nov. 15 release date.

Fool contributor Alex Planes holds no financial stake in any company mentioned here, although he wouldn't mind holding an iPad or a Kindle Fire. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of, Apple, Netflix, and eBay; creating a bull call spread position in Apple; and creating a bear put spread position in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (3)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 28, 2011, at 8:31 PM, foolindeed1 wrote:

    B&N is coming out with Nook Color 2 shortly. Also, current e-Ink Nook Simpletouch is still better designed than even the new Kindle Touch with battery lasting two months with ONE hour reading with Wi-Fi off thus it's still twice as long as new Kindle's two months with HALF and hour a day with Wi-Fi off. More, Kindle Touch still flashed black on each page turn while Nook Touch reduces the flashing by 80%. If you walk in with the Nook to Barnes & Noble store, you’re allowed to read ANY available eBook for free while in the store via free provided in the store Wi-Fi. The new Kindle's prices that are being advertised are add-supported ones while normal devices will be $30-50 more expensive.

  • Report this Comment On September 29, 2011, at 12:05 PM, XMFBiggles wrote:

    I won't argue with the merits of your tech spec points, but I have to ask about this one. Do you really think that the ability to read e-books for free inside a B&N store is going to move the needle on Nook sales, especially in the face of a less expensive Kindle?

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