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Walmart’s Deal With Rakuten Hits Amazon Right in the Kindle

Walmart - Walmart’s Deal With Rakuten Hits Amazon Right in the Kindle

Source: Kobo

Wal-Mart Stores Inc (NYSE:WMT) is striking back against Amazon.com, Inc. (NASDAQ:AMZN). Last year, when Amazon bought Whole Foods, it was a shot across the bow at grocery-leader Walmart.

Well, turnaround is fair play. Yesterday, Walmart announced a partnership with Japan’s Rakuten Inc (OTCMKTS:RKUNY) that includes an agreement to sell Rakuten’s Kobo eBooks and audiobooks through Walmart’s website, in addition to stocking Kobo eReaders online and in stores.

With this move, Walmart is preparing to hit Amazon right in the Kindle.

Walmart Announces Rakuten Partnership

Walmart put out a press release announcing a strategic partnership with Japanese e-commerce giant Rakuten.

One endeavour they will be undertaking together is an online grocery delivery service in Japan. The more interesting one is a serious shot at a market that Amazon completely dominates: eBooks.

Rakuten owns Kobo, one of the few remaining makers of eReaders that can compete with the Amazon Kindle (I own both Kindles and Kobo eReaders and personally prefer the Kobo). Kobo’s selection of eBooks may not quite match Amazon’s library, but it does boast nearly 6 million titles.

Walmart has offered Kobo eReaders in some stores, but it’s been spotty. This new agreement will put prominently featured Kobo eReaders in 4,000 Walmart stores in the U.S., along with digital book cards for in store eBook purchases.

In addition, customers will be able to buy Kobo eBooks and audiobooks through Walmart’s website later in 2018. And Kobo will co-brand its eReader app for iOS, Android and PCs to reflect its Walmart partnership.

Walmart Takes On One Of Amazon’s Marquee Businesses

The Kindle and eBook sales have been a core business for Amazon since 2007. They may not represent much in the way of revenue for the company these days, but Amazon still dominates this market. At this point, over 80% of the eBooks sold in this country are bought from Amazon, and many of those are read on Kindles, including the company’s new flagship Kindle Oasis eReader.

Walmart is entering the market for eBooks with a complete end-to-end ecosystem. Kobo eReaders will be sold online through walmart.com and in stores. The eBooks and audiobooks to go with them will be online and in stores, through digital book cards . And there will be apps for mobile devices. All of this is a direct challenge to Amazon’s eBook dominance.

And with 4,000 brick and mortar stores and an ongoing campaign to boost its online shopping experience, Walmart is the one company that could actually knock Amazon down a few pegs in this area.

Is this retaliation for Amazon invading Walmart’s grocery turf with the 2017 acquisition of Whole Foods? It doesn’t really feel like a coincidence…

eBooks Resurgence, Or An Amazon Pile-On?

In 2017, eBooks sales seemed to be slipping as printed books regained some lost ground. Whether the digital format is set to make a comeback in 2018 or not, it appears that there will be a fight to knock Amazon down from its position of dominance.

Besides the Walmart and Rakuten partnership, Apple Inc. (NASDAQ:AAPL) is once again showing signs of interest in the market.

According to Bloomberg, Apple is preparing the biggest overhaul in years to its eBooks offerings, including a simplified Books app (replacing iBooks), and a redesigned eBook store. To help with this, the company has hired a former Amazon Audibles VP.

While 2017 was a slow year in the eBooks industry, 2018 is shaping up to be very interesting. According to AuthorEarnings, Amazon grabbed 83.3% of eBook sales by volume in the U.S. last February. Apple claimed 9.0%. And Kobo managed just 0.3%.

If Walmart and Rakuten (along with Apple) have their way, those numbers could look very different by the end of this year. 

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2018/01/walmart-deal-rakuten-amazon-kindle/.

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