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IoT
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Mobile // Mobile Business
Commentary
6/16/2014
10:30 AM
Mike Feibus
Mike Feibus
Commentary
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What Amazon Phone Could Mean

Watch for Amazon's long-rumored device to usher in a new era of commerce-optimized smartphones. Call it the industry's first sell phone.

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When Amazon unveils its first own-branded smartphone, as it's widely expected to do at its media event Wednesday, it will open up a whole new set of opportunities to leverage its mammoth commerce engine -- opportunities that dwarf what its tablet and TV hardware currently present.

A successful smartphone would give Amazon a powerful leg up on competitors in selling a wide variety of goods and services. So watch for a repeat of the razor/blade strategy that has worked so well with its Kindle Fire tablets: price them to move and make money selling books, videos, and other content. Amazon just unveiled its home-grown streaming music service, Prime Music, and that would pair well with a smartphone.

Moreover, a smartphone would present far more opportunities for sales than tablets because consumers typically spend more time with their smartphones and carry them with them as they move about their day. Combine that with the insight that Amazon, the nation's largest e-tailer, has about how each of us research and buy goods and services, and you can begin to see the possibilities.

Let's say, for example, that you're shopping in a large retail district in a major metropolitan area. From your Web activity at home that morning, Amazon knows that you're in the market for a 40-inch flat-screen TV. So when your phone detects you walking into the Best Buy at the mall, Amazon can make you an offer for a TV at a price that the brick-and-mortar retailer can't match. A courier could pick up your new TV from a strategically located Amazon warehouse, then meet you in the parking lot and set it on the back seat.

Amazon already offers limited same-day delivery service in some areas, so it would be easy for them to cover major retail centers in this manner.

[For a look at how tech companies are trying to master the Internet of Things, see Google Fit: Another Try At Health Data?]

Amazon's rumored smartphone may turn out to be one mean shopping machine. Call it a sell phone. It's said to have multiple cameras, which would give it 3D capability. That could be used in stores to help identify products on the shelves, giving consumers a powerful comparison tool that would leapfrog barcode scanner apps like RedLaser and ShopSavvy. In turn, that would take some of the guesswork out of which TV set to offer you.

Recall that big retailers like Target and Walmart initially sold the Kindle Fire, but stopped carrying the tablet when they realized that what they were carrying was a device that snagged from them future sales of music, video, and other goods and services. 

This time, retailers will have to fight back against an Amazon smartphone another way, because they won't be able to keep this pocket-able Trojan horse out of their stores.

There's no denying that stealing sales from the big-box retailers from a perch inside our pockets would be a ruthlessly cutthroat maneuver. But Apple, Google, and other tech titans are already doing that to Amazon. When you take that into account, then an Amazon-branded phone begins to look less like an attack and more like a defensive tactic.

In that sense, then, Amazon can't afford not to come out with its own phone. If it does, it risks losing sales to companies that control your smartphone and other "last-inch" devices that deliver information to us.

This isn't a new idea -- and it's certainly not new to Amazon. I wrote about the need for Amazon to produce its own-branded smartphone two years ago, when rumors of an in-house device first surfaced.

A smartphone won't mean that Amazon's worries are all over. It will help to have some control over the three major devices that deliver us content and commerce. And it's great that it continues to develop compelling content to grab our attention, as well as a best-of-breed commerce engine to make hay out of that.

Going forward, Amazon will have to develop some of its own last-mile delivery services, which is the one piece of the experience that it doesn't now control. Google gets that. It's developed its own Internet service, Google Fiber. It's up and running in a few metropolitan areas, with plans to expand to as many as 34 more cities nationwide.

There have been rumors to suggest that Amazon gets it too. Word is that it's been experimenting with wireless services here and there.

It had better. The best services and the best commerce engine are worthless if you can't deliver them to your cool new smartphone whenever consumers want to tap into them. Just ask Netflix.

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Mike Feibus is principal analyst at TechKnowledge Strategies, a Scottsdale, Ariz., market strategy and analysis firm focusing on mobile ecosystems and client technologies. You can reach him at [email protected] View Full Bio
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Lorna Garey
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Lorna Garey,
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6/16/2014 | 6:39:54 PM
Re: Backlash
That's certainly true. However, the last thing Amazon wants is to be equated with Walmart in the upscale consumer's mind. I know I have seen opposition to Walmart opening in some towns out of fear that it will kill downtown and sink small businesses. One day, people woke up and realized that there are no more independent bookstores. Amazon's fault?

I'm not saying that's necessarily fair -- ebooks in general and the recession contributed. But often perception is reality.
Shane M. O'Neill
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Shane M. O'Neill,
User Rank: Author
6/16/2014 | 3:31:13 PM
Re: They'll have to offer the phone for under $50
Yep, a deal on hardware only gets you so far. How can Amazon work around pricey data plans? Build its own? Maybe eventually. Also, the Amazon app store is weak, at least compared to Apple and Google. I'll reserve judgment until the product is actually unveiled, but it's up against a lot barriers, in theory.
Ariella
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Ariella,
User Rank: Author
6/16/2014 | 2:13:30 PM
Re: They'll have to offer the phone for under $50
@Lorna good point. One has to remember what people will expect to be able to do on their phones. 
Lorna Garey
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Lorna Garey,
User Rank: Author
6/16/2014 | 2:05:18 PM
Re: They'll have to offer the phone for under $50
Let's face it, the price of the phone itself is a small part of the decision. Over 24 months, the difference between $50 and $100, or even $150, is minor. The lion's share of the cost is in the data plan. If Amazon figured out how to get around 3/4G bandwidth limits, now THAT would be a selling point. Though as others have pointed out, it also needs the app ecosystem. No one is buying a phone that they can't run Twitter, Facebook, etc. on.
Ariella
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Ariella,
User Rank: Author
6/16/2014 | 1:15:02 PM
Re: They'll have to offer the phone for under $50
It makes sense to me. After all, the phone and Amazon would promote each other, and the company does promote its Prime service at every purchase.
Ariella
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Ariella,
User Rank: Author
6/16/2014 | 12:52:29 PM
Re: They'll have to offer the phone for under $50
Perhaps Amazon could offer some kind of package that gives you  the phone when you purchase Amazon Prime. 
ChrisMurphy
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ChrisMurphy,
User Rank: Author
6/16/2014 | 12:10:19 PM
Re: They'll have to offer the phone for under $50
Is a smartphone optimized for shopping a niche market? Most people want their phones to text, game, map, and use a small handful of apps. Shopping will grow in that mix, especially as the smartphone becomes the wallet, but the others won't diminish. Seems to me people still want that Swiss army knife of a phone.   
Shane M. O'Neill
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Shane M. O'Neill,
User Rank: Author
6/16/2014 | 12:00:56 PM
Re: They'll have to offer the phone for under $50
Yeah, $50 seems about right to differentiate from pricey iPhones and Samsung S5's. But the perception may be that it's a shoddy phone because it's so inexpensive. So Amazon better not cut corners on quality.
Shane M. O'Neill
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Shane M. O'Neill,
User Rank: Author
6/16/2014 | 11:46:45 AM
WIll thriving ecosystem and low price be enough?
Amazon has a thriving ecosystem and the Kindle Fire tablet shows Amazon can play to win on mobile devices. Amazon has never been afraid to price the hardware low, knowing its commerce services will pick up the slack. I expect it will follow that same strategy here. But with smartphone users mostly happy with their iPhones and Android phones, I wonder if Amazon, despite its commerce muscle and generous pricing, is simply too late to the game.
Lorna Garey
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Lorna Garey,
User Rank: Author
6/16/2014 | 11:21:58 AM
Backlash
 Amazon risks people seeing it as a monopoly that's going to stifle competition over the long term -- bad news for consumers. Plus there's the creepy factor of it knowing so much about us. I already defaulted to Better World Books whenever possible for physical books, even before the Colbert-driven Hachette flap. 

The company better market this device carefully.
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