Retailers Could be Amazon's Biggest Threat Yet

Four months after Target (NYSE: TGT) announced that it will no longer sell Amazon's (NASDAQ: AMZN) Kindle line of products, Wal-Mart (NYSE: WMT) announced that it will do the same.

According to a Reuters exclusive, the company made the announcement in a memo sent to store managers Wednesday evening.

"We have recently made the business decision to not carry Amazon tablets and eReaders beyond our existing inventory and purchase commitments," Wal-Mart wrote in the memo. "This includes all Amazon Kindle models current and recently announced."

This announcement comes only weeks after Amazon unveiled an entire fleet of new Kindle Fire tablets, including three with high-definition displays. All of the tablets, (which range from the $159 seven-inch model to a $499 edition that features an 8.9-inch HD display and supports 4G LTE), were designed to undercut the pricing structure of Apple's (NASDAQ: AAPL) third-generation iPad.

While the lower price has proven to be a strong catalyst in getting consumers to make a purchase, Wal-Mart is not interested in continuing its relationship with Amazon. Reuters confirmed this decision after speaking to a Wal-Mart spokeswoman, who said that the company would continue to sell a "broad assortment" of tablets, e-readers and accessories from other manufacturers.

That assortment was expected to include the iPad, which continues to be a hot item for the retailer, as well as Google's (NASDAQ: GOOG) Nexus 7 which was released in July. A quick search on Wal-Mart.com reveals that the company may also continue to sell tablets from Asus, Acer, Samsung, Barnes & Noble (NYSE: BKS) and several lesser-known brands, such as Coby and Ematic.

Wal-Mart's decision to stop selling Kindle products is a sign that the company is worried about Amazon's growing online business. Many think of Wal-Mart, Target, Best Buy (NYSE: BBY) and other retailers as showrooms for Amazon. Thus, some retailers would rather sacrifice whatever profits they may gain by selling Kindles to diminish the Amazon brand and prevent its proliferation.

However, this strategy could backfire. By forcing consumers to look elsewhere for their Kindle fix, they may inevitably shop elsewhere too. Aside from Amazon.com, (which does not yet have its own retail outlets), Best Buy is the current primary seller of Kindle products.

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