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Amazon’s debut smartphone includes differentiated and technically impressive features, but none represent the game changer which Amazon needs to drive consumer adoption. The launch pricing also places the Fire in direct competition with the flagships of established smartphone market leaders Apple and Samsung.
This is a high risk launch price strategy which is unsustainable for a smartphone market entrant. Simply having a well-known brand on the box is not enough to sell smartphones as Nokia and Motorola know well. IHS expects Amazon will reduce the Fire’s price within months to make the Fire more attractive.
By launching on just one carrier, in just one country, Amazon is artificially capping its addressable market at a very low level: AT&T ships around 8 million smartphones each quarter, which is a tiny fraction of the global smartphone market. This year, over 1 billion Android smartphones will ship. Amazon should move to sign up carriers outside the US to build more scale as soon as possible. Because the Fire has nine bands of LTE support, as well as five UMTS bands, Amazon has the option to make further carrier deals around the world.
This limited scale will make the Fire Phone less appealing for the third party app developers which Amazon needs to tailor their apps for the Fire’s differentiated features such as dynamic perspective (the 3D-style interface). Amazon will either need to accept fewer apps supporting the features and so reduced differentiation for the Fire, or it will have to pay for developers to code for its smartphone, raising Amazon’s costs and making it even harder to push its smartphone strategy into the black.
The Fire Phone’s dynamic perspective uses multiple cameras combined with infrared lights to track the owners head in real time and adjust the display to provide a compelling effect. But the use of at least two cameras at a time, and the need for infrared lights to assist in lower light levels may affect the battery life of the Fire Phone. Amazon needs its smartphone to be at least as good as the competition.
While Firefly is technically impressive, 100 million objects is a fraction of the number of objects in the world. Similar functionality is available on other smartphones through apps such as Google Goggles. It has not proved to be a compelling application. Amazon will find it easier to persuade existing Fire owners to test and use this feature than for it to drive Fire customer acquisition. Because, why should a consumer buy a premium smartphone just in order to have an easier way to buy more other goods?
Amazon has missed another tactic to make its debut smartphone more compelling: It has not included Google Play store, and so it lacks the important Google apps which consumers expect on smartphones. Additionally, Android smartphone owners which switch to Fire, will have to leave their existing apps behind.
At this price, and with this launch proposition, the Fire will struggle to ignite the smartphone market. Competitor smartphone makers will respect the Fire’s achievements, but will not fear it taking away their customers.
Amazon needs to shift its proposition to succeed, and even more importantly must make sure it continues to innovate with the Amazon apps which many more of its customers use on iPhones, and Android smartphones from Samsung, LG, HTC and others which will continue to represent a much larger share of Amazon’s mobile customers than the Fire for years to come.