Learning from Past Mistakes: Amazon’s Strategy Post-Fire Phone Failure
After years of speculation, Amazon finally launched its own smartphone in 2014 (finally?). Industry observers, however, already knew that it would not be an ordinary phone. Instead, like with the tablets, the retail giant aimed to tightly integrate the device into the existing Amazon ecosystem, allowing movies, series, music, eBooks, games, and apps to be accessed directly and without detours.
Beyond the solid technology (Snapdragon 800, 2GB RAM, 13 MP camera), the unique selling point was supposed to be the 3D perspective display of the operating system and some apps that would convince customers. With four cameras on the front, the device tracks the user’s movements to adjust the display view accordingly. What sounds interesting in theory, however, failed to deliver the hoped-for “aha” moment for most testers in practice. While the effect was often praised as an intriguing innovation, the lack of practical everyday use overshadowed this (negatively).
Great ambitions, small returns
The biggest problem with the device was undoubtedly Amazon’s highly ambitious market entry. The phone was not only extremely expensive but also exclusively available through a selected few mobile carriers. Here, they obviously took a page from Apple’s playbook, which followed a very similar strategy with the iPhone launch (in 2007!). Back then, it worked—partly because Apple could rely on a particularly loyal fan base, and partly because the first iPhone genuinely introduced several significant innovations (e.g., a highly responsive capacitive touchscreen, fast browser, particularly simple usability).
The high price, carrier exclusivity, and SIM lock ultimately resulted in mostly negative customer reviews for the Fire Phone. It ended up with only 2.6 stars—lower than any other Amazon product before. Later estimates on sales figures did not look particularly promising either.
However, Amazon didn’t watch the spectacle for long: In November 2014, they lowered the Fire Phone’s price to $199, still including a one-year Prime membership worth $100, and for the first time offered it without a SIM lock. Instead of burying their head in the sand and ignoring the failure, they went on the offensive. Simultaneously—and probably for the first time something like this happened—Amazon set up a new product page. Instead of continuing to sell the discounted device with predominantly negative customer reviews, buyers could now provide new feedback.
The moral of the story … ??
And indeed, the shift in sales strategy also resulted in higher customer satisfaction. Instead of a poor 2.6-star rating, the Fire Phone now boasts a comparatively very good 4.0 stars (in the USA) thanks to the new product page. Now, one might wonder if Amazon will learn from this failure and if customers can expect a shift in the mobile strategy.
The clearance success of the Fire Phone (effectively for 99 euros, deducting the Prime membership) demonstrates mainly one thing: When you bring a functionally limited device to market, it must be reflected in the price. Customers are clearly willing to accept some drawbacks if the price is right. However, for a premium price, customers expect unique features and innovations (and the 3D perspective is obviously neither). Apple already serves the high-end segment with a closed system, while all others (Samsung, Sony, HTC…) offer an open system (Android) with premium hardware. Somewhere in between lies Microsoft’s still struggling Windows Phone.
So why would one opt for the Fire Phone with good (but ultimately not outstanding) hardware and partly significantly limited software functionality? This question clearly wasn’t thoroughly considered at Amazon headquarters. Meanwhile, the retailer is facing the same consequences with tablets, as sales figures have drastically decreased in 2014, according to IDC analysis. A contributing factor is undoubtedly the growing budget competition. Many small manufacturers offer particularly affordable but sufficiently powerful devices with an open Android system. When Amazon launched the Fire tablets, it was the budget breaker itself—today, despite the expanded tablet lineup, this is no longer the case, or only so in a limited manner. Here too, it stands: Why opt for a Fire Tablet when you can use the unchanged Android interface for a similar price?
It will be interesting to see whether Amazon learns from recent mistakes and setbacks and is willing to conduct a (possibly radical) course correction. The Tolino Tab 8 demonstrates how to sensibly integrate one’s ecosystem into the existing Android system. But even if they don’t want to go that far, Amazon would be well advised to largely restore regular Android usability (i.e., home screen launcher with wallpaper and app drawer, without app carousel; widgets and other customization possibilities).
What is clear, however, is that the retail giant intends to stick with the smartphone business. In what form this will happen remains open. What do you think needs to happen for Amazon to gain a foothold in the fiercely competitive smartphone market or stop the downward trend in tablet sales?
