Amazon on Wednesday announced a device that tries to fulfill the retailer’s dream of being integrated into consumers’ lives at every possible waking moment – whether they are deciding where to eat, realizing they need more toilet paper or intrigued by a snatch of overheard music.
The device is a cellphone, but making calls on it got almost no attention at all at the event in Seattle where it was unveiled. The Fire phone, the product of four years of research and development, offers Amazon fans the chance to live in an Amazon-themed world, where just about every element can be identified, listed, ranked, shared and, of course, ordered. It offered a view of a mobile future that will be alluring to some but might repel others.
If the device works as described, and Amazon entices even a small portion of its 250 million active customers to buy one, the Fire could accelerate Amazon’s already intense competition with other retailers and tech companies, not to mention intensifying some of its current battles with suppliers.
As if to underline the no-gloves nature of the battle, a promotional video in the first few moments of the presentation took a direct slap at Apple. Both Apple and Samsung were criticized for having inferior cameras in their devices, and there seemed to be other jabs at technology like Google Glass.
The Fire’s product recognition feature, Firefly, “is potentially a real threat to bricks and mortar retailers,” said Rebecca Lieb, an analyst with the Altimeter Group. “Scan a product or listen to music, and you’re delivered straight to the page on Amazon on which you can purchase it. Impulse shopping just went to a new level.”
Amazon’s phone – consumers can order it now; it ships starting July 25 – is arriving as the leading tech companies are increasingly trying to develop an array of services and products to keep consumers from wandering, the digital equivalent of Disney not wanting you to leave Disneyland for lunch. So Microsoft brought out a tablet; Facebook tried a phone; Google is experimenting with a shopping and delivery service.
Against such a frenzy of competition and innovation, an Amazon phone was inevitable. The company’s leaders asked themselves only one question, Jeff Bezos, Amazon’s founder and chief executive, told the crowd at the event: “Can we build a better phone for our most engaged customers?”
Bezos touted Firefly heavily as well as something Amazon calls Dynamic Perspective. Cameras on the phone allow the user to gain another view of a video game or see layered information on a map, like a Yelp review. Whether Dynamic Perspective is a gimmick or something more will depend on how aggressively developers invent new apps for it.
“This is the next big battleground in the ecosystem war,” said Ben Schachter, an analyst with Macquarie. “Amazon is not going to turn the tide decisively in its favor with this, but just needs to establish a beachhead.”
The announcement took place in a warehouselike space filled with 300 members of the news media, app developers and hand-picked Amazon fans. The presentation began with videos from people begging to attend; 60,000 people applied to do so.
Bezos began by citing laudatory reviews of the company’s existing hardware, including its tablets.
“The most important thing we’ve done over 20 years is earn trust with customers,” he said.
Amazon’s leap into the smartphone business comes as sales of the devices are beginning to mature, at least in the United States and Europe. Their use for shopping, however, is just beginning to explode. In the United States, purchases made with phones will jump more than 25 percent this year to over $18 billion, according to eMarketer. At the moment, most mobile shopping is done with tablets.
Bezos, for all his zeal, was relatively circumspect about the phone’s ultimate implications. Ralph de la Vega, chief executive of AT&T Mobility, Amazon’s carrier partner, was more direct during a brief appearance on stage.
“I am going to buy a whole lot more things with this technology than I ever have before,” De la Vega said.
One interesting question will be whether the phone will allow apps that might take customers to retailers whose prices undercut Amazon. Will residents of Planet Amazon, in other words, be permitted to visit other shopping worlds?
“Our idea is to give the lowest price to the customer,” Dave Limp, an Amazon executive, said in an interview. “If we don’t have it, shame on us.”
As for whether customers will go into physical stores, check a price with Firefly, and order the item right then – inflaming Amazon’s already bitter relations with Main Street – Limp noted that people could do the reverse: Look up something on Amazon and then buy it in a store.
“Both ways are very valuable for customers,” he said.
The lengthy phone development process for Amazon was partly because of the difficulty of the task. Phones are a graveyard of tech dreams. Just ask Google, which was hailed as a genius for buying the handset maker Motorola, and then hailed again for cutting its losses and promptly selling the faded icon. Only Apple and Samsung have found it consistently profitable to make phones.
But Amazon, as always, is operating with a different playbook.
When Amazon introduced the Kindle Fire in 2011, there was a lot of chatter about its being a challenge to Apple’s iPad. It was not. In the first quarter of this year, Apple had about a third of the tablet market, according to the research firm IDC. Amazon had less than 2 percent.
Still, that’s a million more consumers taking up residence in the Amazon ecosystem. Just about anyone who has a Kindle Fire is a good candidate for membership in Amazon’s fast shipping club, Amazon Prime, and just about any Prime member might be enticed to buy a Kindle. Amazon Prime has an estimated 20 million subscribers, who pay $99 a year.
The Fire Phone, which will be available late next month, costs $199 for a two-year contract with AT&T. But Amazon, as expected, is sweetening the deal with a year of free membership in the Prime club.
“If they are able to capture 10 percent of those Prime subscribers in the near term, then that would likely constitute a success,” said Eugene Signorini, vice president of mobile insights at Mobiquity.
That would force Google and Apple, and possibly Facebook and Microsoft as well, to introduce new innovations and features in their own products. That would benefit consumers in the short term, Schachter said.
And in the long term, if Amazon or one of the other companies becomes dominant to the exclusion of all others?