June 16, 2014
Amazon Could Announce Direct Retail Link With New Smartphone
Peter Suciu for redOrbit.com - Your Universe Online
The new smartphone from Amazon is still just in the rumor stage and likely will remain so until Wednesday when an official announcement is expected. However, the New York Times on Sunday offered some details on what we might expect and all indications are that it could be a device that allows for greater connectivity between the handset and the Amazon.com retail site.
Breaking into the mobile phone business hasn't been an easy thing to do, as the Times reported. Google's efforts, including the purchase and subsequent sale of Motorola didn't help the search giant much; BlackBerry continues to struggle; and even Microsoft has failed to gain market share.
So why would Amazon attempt to go where many have ventured and few -- except Apple and Samsung -- have succeeded in the past decade? As the Times' David Streitfeld added, "the phone is the last and most crucial link in this colossal enterprise," which could propel Amazon toward the "rarefied ranks of companies with revenues of $100 billion."
"Mobile is asserting not just its utility but its supremacy," James McQuivey, an analyst with Forrester Research, told the New York Times. "If you're Amazon, you’re worried you're going to be cut out of the next big interface. So you jump in and make yourself relevant, whether your customer is in the bathroom, the kitchen or the car. You go for broke."
Amazon does have a few tricks up its sleeves. For one it could offer the phone to its 250 million customers without a middleman, and for another it could offer those who do buy the phone Amazon Prime membership. The rational for getting into the smartphone business is of course not to sell the mobile device but provide a link to its retail business.
"Amazon's strategy isn't about making money out of the hardware itself; that's not the point," wrote Steve Ranger for Zdnet. "The point is to lock the customer in to its shopping and content ecosystem. And that ecosystem continues to grow steadily. Last week, Amazon added a music streaming service to Amazon Prime — a service that would fit in very nicely if you were about to launch a new smartphone."
Ranger suggested that Amazon will follow a similar plan, which could include offering the hardware at a good selling price but it would work best when plugged into an Amazon Prime subscription. That could provide access to the "free" two-day shipping and access to Amazon's video library.
However, Amazon may still have its work cut out for it.
"Even smartphone makers struggle," said telecommunications analyst Jeff Kagan earlier this month in an anticipation of Amazon's announcement. "Sure there are big success stories like Apple with the iPhone, Google Android and Samsung with the Galaxy S5, but there are also countless other companies who are struggling. What does Amazon.com offer the customer to bridge the gap and let them be successful?"
For Amazon to be successful, Kagan added, "The phone itself has to blow users away. That is the first step. It will have to have some very innovative features that make users think they want to try this device. Then it will have to work with other Amazon.com devices like the Kindle book reading and web surfing tablet. There is a very big hill for Amazon to climb, but if they are successful, the opportunity can be huge. Remember, Amazon.com does not appear to make a profit on their devices like the Kindle. They look at these devices like the shaver and the razor. They give devices like the Kindle and perhaps this new smartphone away almost at cost, and make their profits on the products they buy with it."