During my store visits a couple of weeks ago, I came across a new highlighted product category that is available in most stores—yes, you guessed it right – eReaders.  eReaders are one of the hottest product categories this holiday season and promotional displays are currently seen at most consumer electronics and mass merchant stores.

One common theme across the channel is that Sony is heavily investing in eReaders as a future growth category.  The eReader display is the first thing that you notice when you are in Staples and the most prominent stand in Best Buy’s mobile device section.  Sony has placed so many eReader displays in retail that it is easier to count the chains that do not promote the technology.  Displays for Sony’s eBook reading devices feature informational videos and comparison charts highlighting the key differences between competing eReaders.

Following Amazon’s private label lead, Barnes & Noble also made a foray into the market with the ‘nook’.  The retailer has created a separate section in the middle of its stores managed by a dedicated in-store representative to educate people about the ‘nook’, provide a demo, answer any questions, and pre-order the device.  Yes, it is still only available for pre-order!!!  Let’s hope for Barnes & Noble’s sake that it gets the ‘nook’ out before President’s Day!

Sony and Amazon currently dominate the eReader market largely due to brand recognition as well as the availability of these products.  Out of the ten stores selling eReaders in gap intelligence’s retail panel, Sony is available at eight and enjoys a competition-free presence at seven of them.  Although the Kindle is limited to Amazon.com, given the ubiquitous reach of the internet and lack of holiday lines, customers would have no trouble ordering a Kindle.  Unfortunately for Barnes & Noble, pre-order sales of the ‘nook’ exceeded current production levels and the device has yet to be made available for an immediate purchase.  Barnes & Noble continues to change its shipping and in-store availability date (the last time I checked it was Feb 1st, phew!!).

Several companies are beginning to push their products including Astak’s jetbook, Bookeen’s Cybook Opus, and Foxit’s eSlick, with placements limited to Fry’s.  Amazon has already inked partnerships with major universities to test run the Kindle and also partnered with publishers to ensure text books are available in a compatible format.  Google on the other hand, is already working on building the ‘world’s largest’ ebook library and is unfortunately also quickly becoming a part of the ‘world’s largest’ and perhaps the biggest copyright battles.

According to estimates by Forrester Research, eReader sales are expected to double from 3 million units in 2009 to 6 million units by 2010, with almost one third of the sales taking place during the holiday season.  To capitalize on this expected growth, manufacturers must ensure that all production issues have been addressed sooner rather than later.

eReaders currently sell for over $150 and ebooks carry a $10 average price.  Due to lack of competition, pricing has been relatively stable in this small, but quickly expanding category.  Sony’s ‘Pocket’ and ‘Touch’ editions sell for $199 and $299, respectively, at all retailers except for Walmart where they are cheaper by a buck each, in line with Walmart’s lowest price guarantee.  eReaders are also finding more placements in retailers’ weekly circulars.  Although instant saving incentives are the most common promotion type ($40 average), the product sometimes also sells with a free leather case.

Vendors are positioning eReaders not only as a useful device for college students or business professionals, but also as ideal holiday gift items.  eReaders can prove to be exceptionally useful small devices to anyone who is an avid reader, has run out of space to store more books, or is tech savvy.

The eReader market is expected to go though a sea change in 2010 with a significant increase in the number of brands and product availability (both online and retail).  The category will also see aggressive price competition and possibly adaptations to its sales model and echo system.  Stay tuned for more on eReaders!