Can the Nook Color Find a Niche in the Tablet Market?

Barnes Noble (NYSE: BKS) has sent out invitations to a press conference this week in New York City. The specific topic of the event, set for Nov. 7, is unclear — but it’s almost certain the spotlight will be on its Nook.

It is widely expected that BN will unveil its answer to Amazon’s (Nasdaq: AMZN) Kindle Fire — that is, a 7-inch Nook Color tablet designed to compete with the Fire in price and functionality.

BN did not respond to the E-Commerce Times’ request to comment for this story.

Hugging the Low End

It would be surprising if BN didn’t unveil a Nook tablet in view of the suddenly changed competitive landscape. The big question is how it will price the new device.

The Kindle Fire has effectively carved out a place for itself at the low end of the tablet market, with its US$199 price point. The Nook could be a contender in this arena — but only if comes down from the current $249 retail price for its Nook Color e-reader. Even if it does, however, it still has a high hurdle to compete with Amazon’s wealth of content.

“What Amazon has done is finally identify a price point that is palatable for the average — as opposed to high-end — tablet consumer,” James Brehm, senior strategist and consultant with
Compass Intelligence, told the E-Commerce Times.

It’s doubtful that BN can drop down to $199, however, in Brehm’s view. Best analyst guestimates have placed the cost of producing the Kindle Fire somewhat higher than the $199 retail price Amazon is asking for it.

Amazon will be making this up in content sales, Brehm said — which is not something BN can count on as heavily as Amazon can.

Content Wars? Not Hardly

It would appear that Bmap;N doesn’t stand much of a chance in the tablet wars unless it can come up with an effective niche strategy.

“Barnes Noble cannot compete with either Apple (Nasdaq: AAPL) or Amazon, and are truly reduced to B-side/B-movie status,” Lance Strate, professor of communications and media at
Fordham University, told the E-Commerce Times.

Possibilities include providing more functionality in the device, or perhaps partnering with Microsoft (Nasdaq: MSFT) to tap into a more business-oriented market, Strate speculated.

“In the end, though, the Nook will prove to be an also-ran in both hardware and software, and unless Barnes Noble has some miraculous breakthrough up their sleeves, say a virtual reality interface, they will not make much of a dent in the tablet market,” Strate predicted.

The Education Market

Another possible avenue for differentiation, Brehm suggested, is the education market.

“That has been a hot market for Apple but many school systems, including those in the state I am in — Texas — don’t have the money for that kind of hardware,” he said.

However, money could be had for a lower-cost tablet device, especially one that rolls out as part of a relationship with educational publishers and that is equipped with WiFi connectivity.

“Amazon has a bigger ecosystem for its content — it is going to be hard for BN to beat that even if it does manage to produce a $199 tablet,” Brehm concluded. “It will need a specialized strategy.”

No Worries About Apple

One competitor BN doesn’t have to worry about is Apple. For all the hype over the $199 tablet, Brehm doesn’t see Apple reaching to the lower end of the market to compete.

“Apple will always see itself as a premium product,” he said, “and they will never come down in price to get a larger market share.”

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