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Barnes & Noble Tosses Nook to the Discount Pile

By Erika Morphy
Aug 15, 2012 8:00 AM PT

Barnes & Noble has dropped the prices on its Nook tablet product line with the Nook Color, the 8 GB Nook Tablet and the16 GB Nook Tablet now retailing for (US)$150, $180 and $200 respectively. That amounts to a $20 reduction from the Color's original price and $50 the 16 GB device.

Barnes & Noble Tosses Nook to the Discount Pile

Nook Tablet
The Nook Tablet

Now averaging about $176, the Nook is among the cheapest tablet devices on the market -- even less than Amazon's Kindle Fire and Google's Nexus 7.

What this means, however, is unclear. Certainly the tablet market has become highly price sensitive, with providers jockeying to offer the most features at the lowest cost. Apple may be the exception to that rule with its "cheap" tablet priced around $700, but even Apple does not seem to be immune to the cost-cutting: Rumor has it a 7-inch iPad will be coming to market, presumably at a lower price point.

Furthermore, there are signs that the e-reader/tablet market is about to undergo another shift. Rumors are circulating that Amazon is about to release several new versions of its Kindle e-reader and tablet line in the near future. The buzz is that price cuts on some older-model Kindles are being driven by Amazon's need to make room for its new products.

Grim Losses

Barnes & Noble's decision to slash the Nook's retail price may be more than a matter of competitive pricing.

The Nook is arguably the weakest of the major tablet products on the market, and Barnes & Noble's Nook division has posted some grim losses over this year and last.

As Amazon did with the Kindle, Barnes & Noble is using revenues from its other operations to keep the Nook afloat. How long that will continue, though, is debatable.

Still Room to Grow

The Nook still has room to grow, according to Dan Israel, strategy lead for mobile at Sapient Nitro.

"Look at projections for the tablet market and they are nothing short of mushrooming," he told the E-Commerce Times.

People need to remember that the traditional buyers of the Nook are highly price conscious, he continued. "I think Barnes & Noble is lowering the price to make sure it is competitive on the low end of the market."

It could wind up goosing sales even more than expected, since the cheapest product is now in "impulse buy" territory, Israel added. "It is so affordable now you can get one on a whim or get one for your kids."

A Product for Book Lovers

It is also important to remember that the Nook is a product for book lovers -- not shoppers who want to buy from Amazon, Israel continued.

"Nook buyers aren't necessarily concerned about the number of apps that work on it or the robustness of the screen -- in that respect they are purists. They just want to read."

All of that translates to a commodity device -- and commodity pricing.

The Digital Camera Model?

Yes, the Nook is a device for hardcore readers interested in little else. Whether that is a good thing or not, however, is still up for debate, Azita Arvani of the Arvani Group told the E-Commerce Times.

In general, a price reduction for Nook was inevitable, she said, with fierce competition from Apple, Google and Amazon in the low-priced 7-inch tablet market.

With the Nook clearly more of an e-reader than a tablet, the question must be asked: Which way is the e-reader market headed? Could it be relegated to the niche-bordering-on-extinct category of digital camera?

Also, the issue of the Nook making money for Barnes & Noble -- or rather, not making money -- is not one that can be dismissed, Arvani added.

"The hardware margins are razor thin in the low-cost tablet market," she observed.

Eventually, Barnes & Noble will have to decide that the Nook is able to sell enough e-books and other digital goods to make up for the cost of the hardware, Arvani said.

Barnes & Noble did not respond to our request for further details.

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