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Is Amazon?s fizzling Fire the end for retailer-launched phones?


The disappointing reception for the phone, confirmed by Amazon?s third-quarter financial results, has left other retailers digesting the wisdom of following in the giant retailer?s footsteps with phones of their own. The phone?s flop is a major setback in Amazon?s ongoing foray into more product categories.

?Amazon is in a unique position, relative to other retailers,? said Wilson Kerr, vice president, business development and sales with Boston-based Unbound Commerce. 

?Because their sales are all online and mobile is making up an increasingly large percentage of their revenue, offering the vehicle for these purchases in the form of a smartphone was a bold move. 

?Their first attempt might not have worked, but they are not going away and, as consumer comfort with mobile keep growing, expect them to keep trying to get it right,? he said.
 
Mounting losses
Amazon?s third-quarter financial results confirmed what was already well-known ? Fire sales were poor. Costs related to the phones lowered the giant Web retailer?s earnings by $170 million as losses ballooned to $544 million.

Critics dismissed the Fire as gimmicky.

Amazon?s mistake may have been overestimating the appeal of shopping capability to attract users.

While around 56 percent of U.S. mobile users use their phones to assist shopping, other activities, such as Web browsing, communication services, games, video and listening to music are more widely and heavily used services. 

?Therefore, Amazon?s focus on the shopping was always likely to appeal to a relatively small share of users,? said Nitesh Patel of Strategy Analytics.

?The issue is more about Amazon?s relatively lower brand perception as a provider of mobile phones, and the initial price point of the phone, than its strategy to differentiate,? he said.

The Fire?s low sales need not dim the prospects for retailer-made phones, he said.

?I don?t think the low sales reflect negatively on a retailer made phone to deliver a slick mobile experience. It?s Amazon?s first smartphone, came in at a high price point and may have focused on a use-case, such as shopping, which is lower down the priority list than other experiences.?

When Amazon launched the phone in June, it cost $199 with a two-year contract, putting it in the same price range as Apple?s iPhone and Samsung?s Android lineup. The price was reduced to a nominal 99 cents in September as sales sputtered.

The phone aimed at mobile shoppers by allowing them to learn about products by pointing their camera at a real-world item and calling up a product page on the Amazon site.

Third-quarter financial results confirmed sales tanked.

A four-camera system detected where the user was looking to render third-dimensional perspectives. Another feature could identify 100 million items, including songs, movies, TV shows and Amazon-sold products via different sensors.

Registered users could complete a purchase with one click while Amazon Prime members can have it shipped for free.

Numerous big brands such as Macy?s, Victoria?s Secret and others have talked up the powerful combination of smartphones and image recognition technology to help bridge the divide between real-world and digital shopping.

However, it is not clear that such strategies are ready for mass deployments.

Fire?s problems may be more due to the dominance of Apple/iOS and Google/Android phones than to any perceived problems with the Amazon/Android phone.

?The slow adoption to Fire shows that consumers are likely already entrenched in the Google/Android and Apple/iOS experience,? said Tom Sather, senior director, research, with Return Path. ?It will be difficult to get people to change since Apple and Google have done a good job at keeping people within their own ecosystem.?
 
Media services
It may make sense for Amazon to continue offering a phone since their media services range from books to movies to music, he said.

One of the great retailing missteps?

For other retailers considering going down the same path, however, it may be a warning to just stick to providing a good app that's usable on the popular smartphones.
 
?It may or may not show that masses are ready for something like this,? Mr. Sather said. ?Amazon is clearly investing more in this market to compete with Apple's media offerings. If Amazon can sway more people to Amazon Prime via bundled media offerings and exclusive content like Netflix, people may enjoy the experience on their devices more.

?Until they can compete with the likes of Apple and Netflix, however, it will be a long road before that happens.?

Final Take
Michael Barris is staff reporter on Mobile Marketer, New York.