The world’s largest online retailer Amazon (AMZN) is looking to make its first foray into the cellular world. It has been rumored that the company will be revealing its first smartphone this June. Whispers about Amazon’s latest project, nicknamed "Project Aria," had been floating for over a year now.
Originally it was assumed that the product would be revealed last year, but when that failed the authenticity of said rumors was cast into some doubt. Latest reports from The Wall Street Journal, however, confirm developments, plunging analysts in to a flurry of speculation as to what this will mean for Amazon.
The Thorn in Amazon’s Path
Amazon’s biggest challenge in launching the smartphone will, no doubt, be competing against Apple (AAPL) and Samsung (SSNLF)'s market hold. The two tech giants control 41% and 27% of the market respectively. Companies like HTC, LG, etc., have already tried and failed to carve a niche for themselves in the market, while BlackBerry (BBRY) completely distanced itself from the scenario deeming it a nearly insurmountable task. In such a scenario critics fear that Amazon’s latest device may be doomed before it even hits the shelves. However, we disagree.
The main reason we believe Amazon will work is because of the one feature that has users salivating already – the 3D display. Amazon’s phone is reported to have a completely three-dimensional display quality that can be viewed without the requirement of any special glasses.
The phone supposedly has four front cameras equipped with retinal scanners that will deduce where the user’s vision will be directed and will customize the display accordingly. It will be able to alter text, images and video in order to give the user a complete 3D experience. The device is also reported to have dual back cameras that will allow users to take stereoscopic pictures with their phones.
What Does the Market Look Like?
Amazon has never played ball by the same rules as other industry giants. The company always favored to profit from sales of services than the devices themselves. And so far this strategy has served them well. The easiest example would be Amazon’s Kindle Fire, which debuted in November 2011 at a shockingly low price of $199. An approximate estimate puts the production cost of each device at $150 to $200. Yet the Fire went on to deliver record profits. We see no reason why the newest smartphone’s strategy should be any different.
By promoting the upcoming smartphone at a less than usual price, Amazon can use its service and app revenue to make huge profit lines. And the app revenue will be huge. The upcoming phone, if connected to the same network that the Fire and Fire TV are connected to, will create a first ever cohesive gaming ecosystem. It is quite feasible that the Amazon AppStore, which is said to have 200,000+ apps already in its belt, is coming up with more software to fully utilize this unique predicament. As reports suggest, select app developers have already been invited to check out the latest prototype.
And if that wasn’t enough, the company also has the unmatched opportunity to exploit its position as the leading brand in online sales transactions. Recent reports claim that while electronic sales accounted for 69% of U.S. merchandise transactions, less than 3% of shoppers chose to buy mobile devices from physical store fronts. In fact, an average 24% mobile users and 38% tablet users prefer to shop online. These numbers alone work in Amazon’s favor. As a recent report stated, buying a 3D phone can be a highly visual experience. Shopping online just makes more sense, something which Amazon will be sure to cash in on.
Amazon, clearly, is not a company to be taken lightly. The recent launch of the Nintendo 3DS has already familiarized users with the 3D experience, and demand for the Amazon product is already sky high. Barring that, the company has a unique strategy that almost ensures its position in the global market.
The online retailer has already proved itself a tough competitor in the electronic world and its long history of acquisitions testifies to that. Maybe this product will be the one that turns out to be a threat to the industry giants.