Should Amazon launch a smartphone?

Amazon, the world’s largest online retailer has been in existence since the advent of the internet and capitalized on every opportunity that has existed in the space of internet and computing. Amazon’s major businesses include e-commerce, cloud service(AWS), online advertising, and electronic gadgets. So Amazon has all-around expertise in the world of business and can make use of the resources that they have to make an advent in the world of the smartphone industry. Let us look into the various aspects of the smartphone business that would help us determine if we can enter this market.

The Smartphone Market:

The current smartphone market is not what we could think of like ten years back. It has been dynamically changing every year and every company in the market is pushed to come out with something new every year. This pressure has destroyed companies while for some it has proven to change the business for some. This industry has been dominant in the electronics space and would continue to be that for years to come. The reasons this industry has seen exponential growth are:

• Penetration of Internet
• Increase in digital literacy
• Increased demand for digital companion
• Increased demand for convenient entertainment
• Need for distraction

These factors have made companies envision their own strategy for each user segment that they have identified throughout the world.

Competitors in the space

The smartphone market has very few players in terms of major market share they hold and this shows that it is hard for other companies to make the impact they aim to create. These companies have made it big owing to their consistent efforts to innovate, revolutionize and envision products that have had good reception with customers. The main players in the market are:

• Apple
• Samsung
• Xiaomi
• Vivo + Oppo + Oneplus(Oppo being the parent company of these three)
• Other companies

There have been companies like Blackberry, Huawei, LG, HTC in the past who were also at the top of this list but failed to retain their position due to particular reasons:

• They failed to listen to customers
• They built products that ‘they thought’ would be liked by customers
• They failed to understand the technology shift

The current players have also failed at times but have always listened to customers and come back with something that customers care about. This is the key to survival in this industry and this should be a key decision-making aspect if we are to enter the smartphone industry.

Amazon’s past history with smartphones

Amazon, as we already know, had its first stint in the smartphone industry 8 years back. There was a huge buzz around the launch of Amazon’s own smartphone as it was compared to compete with the market leader Apple’s iPhone. This idea came into existence after the launch of the Kindle reader in 2007 which revolutionized the way people read books. This initial success with an electronic device was the key reason behind Amazon’s idea of a smartphone. The phone had everything that Amazon’s team had planned and was priced at 650 $ at its time of release. The phone eventually failed as:

• It focused on gimmicks like ‘Dynamic perspective’ which had no use to users as it became obsolete after a few days and didn’t add any value to the customer.
• It was relatively priced high at that time, being a newcomer to the market. It didn’t gain the trust of the customer to make them spend that amount of money.
• Amazon’s phone didn’t really focus on the design of the phone while iPhone focuses more on design and has years of R&D spent on perfecting the features and design of their phones. This was a huge blow to Amazon and had no chance to compete with one of the best-selling iPhones(iPhone 6) in Apple’s history.
• Introduced a new OS called ‘Fire OS’ which was unfamiliar to customers and customers had already been accustomed to Android and iOS which made it hard for customers to accept it.

The second stint

With all the history in the past, Amazon can decide to either never step back into this industry again or come up with a better strategy this time to join the competition. Any company can learn from its past failures and this company has learnt lessons with the Fire phone in every aspect. There was loss of revenue, company share and we also lost customers due to poor decision making. So a revised strategy and a better goal for the long term could make us have a strong hold on this business.

• We can set up a team of experts and advisors who have had success in the smartphone industry. This would ensure that we are moving in the right direction and have a product devised by the greatest minds in the industry.
• We can tie up with other companies to manufacture the components of the phone(screen, processor, camera module, etc.,) as we don’t have any previous experience and this is the way even our competitors work. This would ensure that our primary focus would be on designing a user-centric phone and enhancing the user experience.
• We can initially focus on the mid-range segment as we have a huge volume of customers in that bucket. A smartphone that falls under the mid-range price has features that customers care about, and has Amazon’s promise of being ‘the most customer-centric company’ would make a huge impact in the market. We can envision a long-term strategy to serve the high-end segment once we earn the trust of the mid-range segment.
• Since Amazon has other divisions like marketing, advertising, and PR in place, and has worked with other smartphone brands to launch their phones on our website, we have better data to decide the channels and ways to advertise our product, position our product and gain more attention. Having an e-commerce site already in place is a huge advantage.
• When customers know that we listen to their feedback and we innovate to solve an existing user problem is key to success and getting customers to come back again to buy our product.

Conclusion

Amazon has always been successful in every business venture it has stepped in and this particular venture is a challenging venture to get into. Based on what I have analyzed about the competitors and the smartphone landscape there is a huge opportunity for Amazon to capitalize on the mid-range segment where companies are failing now. With the scale of resources, technology, and spending power that Amazon possesses, it can make a huge impact in the mid-range segment. We can envision a long-term future for this venture if we incorporate the above-mentioned strategy and take relevant decisions based on the market shift. So my take would be to make a second stint in this industry and be the ‘customer-centric’ smartphone in the market.