With Barnes & Noble’s Nook Tablet, David Takes On Two Goliaths

Today Barnes & Noble (B&N) announced the Nook Tablet, a beefed-up version of the Nook Color that, in our view, gets everything right. My colleagues J.P. Gownder, James McQuivey, and I spoke with several product strategists from B&N about the Nook Tablet, including CEO William Lynch, President of Digital Jamie Iannone, and GM of Digital Newsstand Jonathan Shar. Our conversations and hands-on time with the device led us to conclude that the Nook Tablet:

  • Is a “wow” product. No, it’s not an iPad lookalike, and it doesn’t need to be. The Nook Tablet improves upon the Nook Color in key areas that matter for tablets, including a dual-core processor and a screen that’s fully laminated with no air gap—two technical details that add up to a better Web and video experience. Compared with Amazon’s Kindle Fire, the Nook Tablet has longer battery life (9 hours vs. 7), 2x the memory, and nearly twice the RAM—feeds and speeds that will make the device more convenient to use and snappier for media consumption and app multitasking. In addition, the Nook’s software update includes innovative experience improvements, such as the integration of recommendations into the navigation UI—think of it as a “Netflix-ization” of navigation.
  • At a decent price. We are not going to pretend that consumers won’t notice the $50 price difference between the Kindle Fire ($199) and the Nook Tablet ($249): The higher price point will give B&N a smaller addressable market for the Nook Tablet than Amazon can reach with the Kindle Fire. But we don’t see it as a major barrier to success, for three reasons: 1) Consumers’ price perception for tablets is actually higher than the price of either the Nook Tablet or the Kindle Fire—a Van Westendorp price sensitivity study that Forrester conducted in September revealed an optimal price point for tablets of $308, which means that both B&N’s and Amazon’s tablet will look like a very good deal to consumers; 2) B&N is keeping the original Nook Color in its lineup and dropping the price to $199, which gives consumers an entry price point to compare with the Kindle Fire so they don’t dismiss B&N out of hand for being more expensive; and 3) the value of the Nook Tablet is enhanced by the free in-store service at Barnes & Noble stores, a strategy that makes good use of B&N’s best asset and takes a page right from Apple’s book.
  • With perfect timing. The Nook Tablet will ship in mid-November, which puts it on shelves in time to compete with the Kindle Fire for the holidays and before Apple releases an iPad 3. If B&N had dragged its heels to launch the Nook Tablet in Q2 of next year, it would be a non-event. Kudos to B&N for moving quickly and launching at the perfect time.

Barnes & Noble’s story has implications for product strategists beyond the tablet space. Product strategists should look at B&N as a case study in “fast following” done right. Barnes & Noble wasn’t first to launch an E Ink eReader, but when they did, they improved upon the experience not just with better features (a touchscreen), but also with better services (e.g., the lending and social features of the original Nook). Similarly, with their tablet launch, they didn’t just improve upon feeds and speeds (although they did, with battery life, memory, and RAM that bests the Kindle Fire), they also improved the overall experience with the innovative “recommendations” feature integrated throughout the navigation. They are using their brick-and-mortar stores to their best advantage as well, offering free service, exclusive content, and full browsing over the free Wi-Fi network in Barnes & Noble stores—benefits Amazon can’t match.

Still, Barnes & Noble is David taking on not one but two Goliaths: B&N’s market cap is just $700 million, compared with $100 billion for Amazon and $370 billion for Apple. We think the Nook Tablet will be successful in its own right, selling 1.5-2 million units this holiday season on top of the estimated 5-7 million units sold to date for the original Nook Color. But Amazon, as we’ve said, will sell twice as many Kindle Fires, and Apple could sell as many as 20 million iPads globally in Q4 with 8 million sold to US consumers. In our September survey, we asked consumers considering buying a tablet what brands they would consider if they were available. Apple was No. 1 with 61%, Amazon was No. 2 with 24%, and B&N was farther behind with 6% of tablet shoppers willing to consider its brand of tablet (before they knew anything about what the product or price would be). This means that B&N is starting from a much smaller base of consideration, but with a solid product, a huge commitment to marketing (they’re tripling their TV ad spend this holiday), and a vast expansion of channel presence (2,000 sq-ft Nook stores-within-stores now under construction, plus 12,000 other retail channels), we think they will expand their appeal beyond initial considerers to take some tablet market share from both Amazon and Apple.

Barnes & Noble wastes no time in expanding Nook stores-within-stores (photo courtesy of JP Gownder)

Photo credit: J.P. Gownder