The smartphone market is brutal. It destroys companies that can’t keep up and makes established tech juggernauts look like a bumbling startup. It’s harsh, unrelenting and Amazon is getting ready to shoulder its way into the fray.
On Wednesday Amazon is expected to reveal its long-rumored smartphone. Judging from the teaser video Amazon released with the event’s announcement, a 3D display is all but a given. Then Jeff Bezos, the company’s CEO, shipped members of the press that are attending the event a book, Mr. Pine’s Purple House. The book is about being different with an emphasis on being purple. Even the note that accompanied the book had a passage that was tinted purple. While the device in the teaser image is black, a purple companion phone could be announced. But a 3D display is almost certainly on the way.
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But 3D displays are far from innovative — and there are already phones on the market with the technology — and if a colored case were that was needed to sell a phone, the iPhone 5C would be be flying off the shelves. Neither of these features are enough for the online retailer to make even the slightest dent in the smartphone world. A smartphone is the most important piece of technology you purchase. It’s not a purchase to be taken lightly or to be swayed by gimmicks. That’s what a purple phone with a 3D display is — a gimmick. Instead, Amazon has something more important than pixels and color swatches. It has a monstrous store with millions of customers.
Jeff Bezos has been forthcoming about his company’s business model when it comes to hardware. They are willing to make slim to no profits on hardware in order to engage customers. Every time a Kindle is sold, it’s not the e-reader that makes Amazon money, it’s the e-books. The Kindle Fire and Fire TV are the same. You’re more likely to buy Amazon products and services if you are part of, and constantly reminded of, its ecosystem. With a smartphone, customers will take that ecosystem with them everywhere.
Wayne Lam, Senior Analyst of Telecom Electronics at IHS sees Amazon entering market with a very different perspective than Samsung or Apple. “They are in the business of monetizing the lifetime value of each subscriber and not in the business of selling hardware or software,” he says.
One way Amazon could entice folks to its smartphone is via subsidized data. A low-cost monthly subscription could come with the bare minimum of data and more data would be added as you spend more on Amazon.com. If you’re a Prime customer, Amazon could sweeten the deal with better rates and a higher amount of monthly data added to your account when you make purchases. The pitch could be that you’re already buying from the retailer, you might as well get something in return.
Amazon gets more sales and you get more data. Even if the company doesn’t launch subsidized data for sales, it could still make using Amazon services enticing by making Instant Watch and the new Prime Music exempt from data usage. Listen to all the music you want without eating into your monthly data cap. Video usage will more likely be capped to a few hours a month, but it’s still a selling point that could appeal to anyone that’s sick of being concerned about exceeding their monthly data cap and incurring extra charges on their bill.
Subsidized data plans are not new. In fact AT&T announced Sponsored Data plans at CES this year. Companies pay AT&T for their customers to have access to their services without that access costing towards a person’s monthly data. Amazon could take it one step further in order to convince you to put all of its services in your pocket.
And being in that pocket, that’s huge for a company that wants to sell everything to everyone. It could also take showrooming (the act of checking the prices while in a brick and mortar store and buying online) to the next level. Why buy something at the local market when Amazon can determine your location and offer you a better price? It’ll be a finely tuned sales associate that brick and mortar can’t compete with.
Amazon’s smartphone is late to the game. Extremely late to the game. And there are changes it needs to make in order to be truly worth buying like supporting the Google Play store for apps instead of replying on its own limited app store. It’s unlikely that Amazon will beat Samsung or Apple, but if it gets the phone into the hands of its Prime members, it’s won.