Amazon’s entry into the smartphone market is taking a financial toll on the online retailer.
In a release of its third quarter financial statements, Amazon reported a net loss of $470 million, just under one dollar per share.
Anchoring the company down are losses attributed to its failed Fire Phone line of android powered mobile phones. The AT&T-distributed handsets were a followup to Amazon’s popular Kindle Fire tablets, but they failed to gain traction amid stiff competition from Apple and Samsung. According to Amazon’s Chief Financial Officer Tom Szkutak, the Fire Phone has cost the company $170 million since its launch in late July, accounting for more than one-third of Amazon’s third quarter losses.
As Amazon reels from the financial shock of its failed experiment, here are a few explanations of what went wrong.
Accessibility
The biggest reason that the Fire Phone didn’t sell was that it wasn’t accessible to customers. A handful of carriers actually sold the phone and it was only available on the AT&T network in the United States. This left millions of consumers unable to purchase the phone unless they switched to a supported carrier. Without the brand loyalty that iPhone and Galaxy lines command, limiting the Fire Phone’s potential user base severely hindered its ability to generate sales.
Pricing was also an issue. While Amazon’s tablets are known for their competitive price points, that concept was not applied to the Fire Phone, which initially sold for $200 dollars with a contract. The phone’s price bracket pitted it against the iPhone and high-end Android models, giving those already invested in Google or Apple ecosystems little incentive to switch. Amazon did lower the price to 99 cents months after launch, but by that time the damage had already been done.
Application Support
Although Amazon’s Fire OS is a customized version of Android, it does not have access to the over 1.3 million apps in Android’s Google Play store. Amazon’s customizations have removed the Google marketplace, relegating users to the Amazon Appstore’s much smaller collection of 240,000 apps. Missing from the Amazon store are all of Google’s services such as Gmail and Drive support, as well as popular photo sharing app Instagram. While users can manually install most Android applications from the internal storage of the phone, it’s a laborious process that shouldn’t be necessary for a smartphone released in 2014.
Performance
Although the Fire Phone was billed and priced as a premium device, it didn’t have hardware or software to perform at that level.
The Fire Phone launched with a Qualcomm Snapdragon 800 systems on a chip, which was already dated compared to the hardware in other high end devices. The 4.7 inch 720p display was also an underwhelming feature, as screen sizes are trending over five inches.
A unique feature called dynamic perspective utilizes a series of cameras to create a 3D effect on screen. It’s neat trick, but it sometimes gets in the way of navigating the operating system.
Speaking of which, the user interface of Fire OS is just bad. The combination of tilts and gestures necessary to reach a menu or transition between applications is not even remotely intuitive, and the cluttered home screen that contains a carousel of all every installed app only adds to the confusion. Using your phone should be an experience, but with the Fire Phone it ends up being a chore.
Too Much Amazon?
The biggest selling point of a phone made by Amazon is, of course, integration with every Amazon service imaginable. The Fire Phone can stream video from Amazon, read books from Amazon, make purchases from Amazon, scan barcodes to compare prices against Amazon, and so on and so forth. It’s truly a consumerist’s dream and even comes with a year’s subscription to Amazon Prime to get the spending spree rolling. The problem is that the Fire Phone is too good at being a Amazon storefront, and not good enough at being a phone.
