In a rather unusual financial report from closing of the second quarter, Amazon reported losses that were nearly double what Wall Street had predicted. Not to mention that Amazon expects this to only get worse as the year progresses with an operating loss predicted to go as high as $810 million, compared with a loss of $25 million in the third quarter of 2013 – surprising or inspiring, you decide.
It could be baffling for the common mortal considering the penetration, value and market share Amazon enjoys not just in North America but across the globe but on the other hand it goes to show how far Jeff Bezos is thinking by investing most of what the company is earning into innovation and potential disruption (positive).
The “Fire Phone” is for me an output of that investment, adding its smartphone line along side the existing Kindle e-reader and the Kindle Fire tablet. While the predecessors have been more focused on content availability and consumer experience, the Fire Phone is specifically targeting increased revenue for Amazon by driving stronger loyalty and commitment from the consumers using it’s Prime service as well as potentially keeping relatively higher margins – not a bad strategy as long as it is able to provide a stronger Experience & Story.
Quick Thoughts on the Device
Touted as a step-change in smartphones, the device does have some cool features however we will have to wait and see how quickly new apps get on board. Two of its main hyped-up features are:
- Dynamic Perspective – Allows the phone to react to how you hold, view, and move it. Provides a near 3D appearance for products
- Firefly – Can scan objects like books, movies, posters, QR codes, and household goods to give you more information about them and perhaps drive you towards purchase – very important in terms of driving ROI
With the pricing model for the phone, Amazon seems to be trying a rather different strategy than its historical trends where it tends to give the hardware rather inexpensive in trying to influence higher revenue through consumer purchases. Just on the price point itself, we will have to wait and see if consumers prefer to pay a similar price as the iPhone or the Samsung while also making purchases off Amazon.
Is there a lower priced “Fire S Phone” in the making or perhaps targeted towards a highly selective and niche audience? Not to forget what happened when Facebook tried something similar when it launched Facebook Home/HTC First but, as Ben Thompson pointed out ”that proved that just because people love Facebook didn’t mean they wanted Facebook to dominate their phone, and by extension, their lives”.
Regardless of what the future may hold for Amazon Fire Phone, it is certain that innovation through positive disruption is at the core of Amazon’s strategy, from the “drones” to the “fires”, Amazon continues to break the norm and lead the way for rest to follow. The lack of margins and consistent losses seems to be a phase and just a question of time before the core revenue model picks up steam and make Wall Street and the shareholders rather pleased.
To end, here is an info graphic by Walker Sands showing the future of retail, perhaps it needs some quick rework as the landscape gets shaken one more time: