GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

With This Move Amazon Has Secured Its Future

June 22, 2014 | About:
Quick Pen

Quick Pen

0 followers

Amazon.com (AMZN), the online shopping giant, has finally come out with its much discussed and latest offering -- Amazon Kindle Fire phone. But the industry experts and analysts are not considering it to be a genuine competition for Apple (AAPL), and believe the device is targeted towards the online-shopping audience more than the smartphone audience. At best the new device can compete against the low-spec affordable devices powered by Google (GOOG) Android, but there are significant doubts regarding that too since the device will run on a highly forked version of Android. Does this mean Amazon failed to make an impression with its Fire Phone?

Amazon’s Game Plan

The answer to the above question is ‘No’. This move will rather help strengthen its future even better. Amazon’s idea behind launching the Fire Phone was never to capture a chunk of the smartphone market. Had that been the aim, the company would have played it a lot differently. The primary idea behind the gadget is to make the consumer experience while shopping online so easy that they can’t think of another way of doing it. Since the beginning of the company in 1994, Amazon has maintained its focus on selling products and contents online and its business model has given the company exceptional growth. Founder and CEO Jeff Bezos strongly believe in the business model and every step that he takes is well aligned to it.

According to a recent report from The Census Bureau of the U.S. Department of Commerce, U.S. retail e-commerce sales accounted for only 6.2% of the total retail sales during the first quarter of 2014. The figure has been constantly rising – in the first quarter of 2005, the contribution of e-commerce was near about 2.3% of total retail sales. Analysts expect the contribution to skyrocket in the coming days and gradually account for lion’s share. Amazon’s strategy is to rise on this growth wave and capitalize as much as possible.


Source: The Census Bureau of the Department of Commerce Report, May 15, 2014

A smartphone is always with the user and this makes it the most convenient shopping device. Already there are hundreds of apps that support online shopping and almost all major retailers have a dedicated app for the purpose. However, users still have to go round and round to search for something specific. This is where Amazon’s Fire Phone creates the difference.

Amazon has put in something in the device that will allow users to click snaps of real-world objects and search for the item online. The user will be able to get instant information regarding the price of the items, reviews users have posted; compare the item with other similar items. Amazon calls this feature ‘Firefly’. Firefly possesses capabilities to identify anything – right from a physical object to something as intangible as a song. The company believes this feature will not only easy out the online shopping process hugely and help increase the contribution of e-shopping in total retail sales, but also provide a massive boost to its growth.

Departing Thoughts

Beyond any doubt the idea that Amazon has in place is impressive and nothing like what we have ever experienced. E-commerce is growing and any firm which can establish itself in the industry can be expected to survive for at least coming two decades. But this doesn’t mean it’s free from challenges. The primary challenge that the company might face is getting user acceptance. The general smartphone users might not be much interested in this device since it will run on a forked version of Android, just like the range of tablet devices from Amazon. This stops the users from getting the entire Android experience.

The device will carry a price tag ranging from $199 to $299, and this puts the Fire Phone in direct line of competition with those from Samsung and others. So, unless the user is someone who is looking to buy an Android phone and also has a fetish for shopping, he might just go with the proven and more prevalent brands. However, Amazon has done it in the past and might do it again. Many expected poor sales for the Kindle tablet. But, to everyone’s surprise the device was a huge hit. The same can be the situation for the Fire Phone. Apart from Firefly, another new feature in the device is the software-enabled 3D display using four front facing infrared-cameras, making it the first of its kind. These few different features may do the trick for the online shopping giant.

About the author:

Quick Pen
A seasonal writer with a Management Degree in Finance and interests in automotive, technology, telecommunication and aerospace sectors.

Rating: 0.0/5 (0 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK