Millions of Fire Phones left unsold
It was obvious that a smartphone marketed mainly on gimmicks would fail.
The confirmation came in Amazon’s latest earnings call, in which it revealed revenue and profits missed the target while losses ballooned to a staggering $437 million. Lacklustre sales of Amazon’s flagship (and only) smartphone were partly to blame, as CFO Tom Szkutak said the company still has $83 million of unsold Fire Phones.
Amazon also said they would take a $170 million write down related to the Fire Phone – basically they had ordered too much and made promises to suppliers that they couldn’t keep. Perhaps they should take a lesson from Apple’s CEO Tim Cook who is widely regarded as the master of supply chain management during his previous tenure as COO. But the real issue isn’t related to inventory management or production; rather it concerns the device’s appeal and desirability – Amazon reportedly managed to shift just 35,000 units in the US and dropped the on-contract price to 99 cents the day before Apple launched its two new blockbuster iPhone 6 models.
The problem is that nobody wants to buy a Fire Phone right now. While it has been available in the US on AT&T since July, it launched in the UK in September on O2, and comes with 12 months of Amazon’s excellent video subscription service, Amazon Prime. On the O2 website however, the Fire Phone is nowhere to be seen in its Top Phones section.
Amazon’s device strategy is to sell its hardware (such as the popular Kindle e-book readers) at cost price, in order to drive customers to its online store to buy stuff. But how long can Amazon continue to operate at a loss or barely a profit? Its business model is in stark contrast to Apple, whose aim is to sell premium, high-end and desirable products tied into an ecosystem of digital content and cloud services.
Perhaps it’s time for Amazon to rethink its mobile strategy.
What is wrong with the Fire Phone?
On paper the Fire Phone appears to tick all the right boxes. The hardware specs are up to scratch: a 4.7-inch screen at 720p HD resolution (identical to the iPhone 6) and 2GB of RAM, with a more than capable Qualcomm Snapdragon 800 quad-core CPU clocked at 2.2 GHz – at least on a par with last year’s flagship Android smartphones. Unfortunately, Amazon has squandered the opportunity by making some bad choices in hardware and software features and design.
Firstly, the headline feature known as 3D Dynamic Perspective is totally unnecessary and doesn’t add anything to the experience after the novelty of glasses-free 3D has worn off. In order to differentiate its hardware from competitors, Amazon made a huge deal of this at launch.
Its faux 3D-trickery relies on four tiny cameras and infrared sensors on the front of the phone to determine where the user’s head is, and moves the display accordingly so that you can “peer round” objects in maps and so on. But besides the built-in software, only a select few specially-designed apps can use it, and the effect, while mesmerising at first, soon becomes tiresome.
Amazon’s first Android smartphone feels dated, and even a powerful object-recognition system can’t lift its rudimentary software – The Guardian.
But perhaps the most critical problem is that the Fire Phone uses Amazon’s proprietary Fire OS which is based on Android, so it can’t run standard Android apps. What’s worse is that many of Google’s services, music and video content is blocked or not installed, so you are forced to use Amazon.
This negates the benefit to consumers of using Android in the first place, and the user interface is also inconsistent and more cumbersome than stock Android. Because Amazon’s services are also available to every Android smartphones out there, there’s absolutely no incentive to buy the Fire.
In its defence, Amazon has done a lot to encourage developers to create apps for its Fire OS line of devices (such as the Kindle Fire tablet), and there are now over 240,000 apps in the Amazon Appstore. Some of those probably won’t run on the Fire Phone however, but the “app gap” isn’t too bad if you don’t mind doing without the million plus Android apps in Google Play.
In terms of design, the Fire Phone is solid enough and uses high quality plastics, but it’s not exactly considered sexy and there is only one model. Even Apple has realised that a one-size-fits-all approach doesn’t work any more. Amazon needs several screen sizes, colours and materials to attract a range of buyers.
Another issue is that in every market where the Fire Phone is sold (the US, UK, and Germany), it’s only available on a single mobile network (AT&T, O2 and Deutsche Telekom respectively). It’s unlikely that anyone will switch networks just to get the Fire Phone, and it certainly won’t create pent-up demand by being restricted to one or two carriers.
Lastly, one of the phone’s main attractions is called Firefly. It works by allowing you to point the camera at any barcode, text or picture, and in most cases it directs you to the Amazon store to buy the product. Unfortunately, its main selling point is also its drawback – it only seems to work for items that Amazon sells. This all leads back to Amazon trying to sell you more products. In essence, the Fire Phone turns you into the product.
The outlook for the Fire Phone isn’t all bad
Amazon can almost be forgiven for its initial missteps with the Fire Phone. After all, it is the company’s first smartphone and represents quite a technical achievement, albeit with some significant flaws. Just like Microsoft’s Surface lineup (which initially flopped), if Amazon is prepared to refine and iterate the product over successive generations, it could eventually become the success that it dreams of.
The ability to run standard Android apps and allow access to Google’s services, as well as dropping the Dynamic Perspective feature would be welcome improvements, besides more choice screen sizes and styles that would appeal to a wider audience. Jeff Bezos is the kind of person who is unlikely to admit defeat, but it’s the shareholders that might ultimately run out of patience if Amazon’s balance sheet doesn’t show signs of a turnaround.
Rather than pour scorn on the Fire Phone, we should consider it a valiant first attempt that tried to include some genuine innovations. After all, more consumer choice and competition is always a good thing. Let’s hope that when Amazon introduces the next version, it will have learnt some valuable lessons (the hard way) about the cut throat smartphone business.