Amazon Kindle Fire cools off?

When Kindle File went on sale about 6 months ago devices shipped totaled 4.8 million in Q4 of 2011. Analysts estimated strong sales numbers on par with Apple iPad which was also selling about 1 million devices per week and about 15 million total.

Now, number of online articles report that Kindle Fire fell off the cliff. Research firm IDC reports Amazon's share plummeted from about 17% in the fourth quarter of last year to just 4% in this year's opening quarter. IDC’s Tom Mainelli points to targeting and positioning difference of the two tablet products as a reason: "Apple's move to position the iPad as an all-purpose tablet, instead of just a content consumption device, is resonating with consumers as well as educational and commercial buyers." Bloomberg reports “Fatigue is starting to kick in about six months after a product has launched.” Apple sold 24% less iPads in the Q1, but somehow managed to increase market share to 68% from 55%.

However, this may be misleading. The main question to ask is how market share is defined here? IDC measures market share as devices gets shipped, not sold. I assume that Amazon shipped close to 5 million devices in Q4 for the holiday season and some did not sell and as demand seasonally weakened, resulting in Amazon shipping fewer devices for Q1. I assume that some devices shipped in Q4 were sold in Q1. Amazon has yet to disclose any numbers on Kindle sales. There is a definite seasonal effect in sales and shipments of the tablet devices but I have strong reasons to assume Kindle sales did not collapse as shipments indicate. If you look at comScore report showing global digital device usage (not shipments or sales), Kindle Fire commands more than half (54.4%) of Android tablet market, which trumps runner up Samsung Galaxy by more than 3 times.

How sales of Kindle Fire can further increase? There are 4 basic strategies:

1.       Increase promotion: advertising and incentives

2.       Increase channels

3.       Increase volume at the time of purchase

4.       Manage seasonal inventory 

Amazon usually does not have substantial marketing budgets and uses price as main incentive to stimulate sales. On the number two, news such as Target and some other retailers will stop selling Kindles may mean weaker devices sales. In addition, Kindle Fire today is US domestic product leaving international markets untapped. Taking Kindle Fire to the markets outside the USA can provide strong competitive response and boost sales. On the number 3 promoting a family purchase plan may increase sales. Finally, the holiday season is one of the best times to take advantage of opportunistic shoppers buying gifts.