Amazon’s 'Fire' Phone a Threat to Retailers, but Will it Succeed?

Amazon’s 'Fire' Phone a Threat to Retailers, but Will it Succeed?

Amazon Fire

Amazon jumps into the cell phone market to solidify their dominant position in e-commerce, but has many questioning the product's future success.

Last week Amazon announced its entry into the smartphone market with the Fire phone, but not without raising a few eyebrows. At $199 for a two-year AT&T contract and $650 unlocked, Amazon was not particularly competitive with its price, basically matching Apple’s iPhone 5S and the Samsung Galaxy. Nor does Amazon’s phone have any compelling features that differentiates itself against existing smartphones -- its Dynamic Perspective feature has gotten a lackluster response, and its success is dependent on the degree to which developers begin creating new apps for it.  Get the latest Amazon data in DataFox - must be logged in to view.

What might be more relevant to Amazon’s strategic focus for the Fire phone is its audio, text, and image recognition app called “Firefly,” which identifies physical products near the user or music that the user is listening to and sends them directly an Amazon page to purchase the item or song. The feature is another headache for traditional retailers, who have already seen sales decline as a result of consumers coming into shops and comparing prices online on their smartphones.

Amazon Competition

[Image via TheRegister]

Amazon has the additional advantage over traditional retailers of gathering data on their customers’ shopping habits, collecting data on searches, cart additions and removals, and purchases, which has helped Amazon develop a patent-protected system called “anticipatory shipping.” Anticipatory shipping looks into a customer’s past buying habits and ships products to warehouses near them in anticipation of their orders such that the item can be delivered within a day. Additionally, Firefly was announced over the backdrop of Amazon’s drone delivery program, so it’s not hard to imagine a scenario in which a potential buyer goes to a shop, uses Fire’s Firefly feature to find a better deal on Amazon, and has the product waiting on their doorstep when they get back home.

The Fire phone is Amazon’s latest attempt to maintain their retail strength. Although Bezos has made it clear that the phone is not an attempt to lure more customers to Amazon Prime, the phone comes with a free year’s subscription.

Regardless of Amazon’s intentions with the Fire phone, there is no doubt that the phone is Amazon’s attempt to keep core customers (i.e., those of Amazon Prime) focused on their business. Just as Microsoft put out a tablet, Facebook tried releasing a smartphone based on its social network, and Google began experimenting with online shopping, so too is Amazon attempting to consolidate its consumers and offer a unified customer experience through the Fire phone.

Amazon vs US Retail E-Commerce

[Image via BazaarVoice]

However, despite the Fire phone’s strategic focus on funneling users to Amazon Prime, the success of the phone is entirely dependent on whether the phone’s integration with Amazon’s retail stronghold will be convincing enough to compel consumers to abandon its Apple / Samsung / Android counterparts. To this end, the Fire phone faces real challenges. The phone is a bit thicker than its counterparts (under the premise that it was designed to be sturdier), which may detract from its aesthetic appeal. Additionally, Amazon’s lack of a strong app marketplace (compared to Google Play and Apple’s Appstore) is a significant handicap. The phone’s 3-D Dynamic Perspective may have curb appeal, but ultimately doesn’t seem to be compelling enough to lure customers away from other phones. Even Firefly, the feature that Bezos arguably touted the most during the phone’s announcement, is problematic: what will stop incumbent smartphone giants from replicating the shopping convenience that Firefly provides with native apps on their own platforms?

Ultimately, the Fire phone fails to differentiate itself from other offerings on the market in a substantive way. Amazon’s pricing plan is not aggressive enough to make up for its lack of apps and relatively weaker aesthetic appeal, and the phone’s innovative features are probably not enough to entice anyone who is not already an Amazon enthusiast. Still, the phone is part of a continued attack on the territory of online and physical retailers, and a focal point of Amazon’s strategic focus on fortifying it's dominant position in e-commerce.

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