Amazon on Monday dropped the price of its 32-gigabyte Fire Phone to a mere 99 US cents from its original $199, with a two-year contract. The 64-gigabyte version now sells for $99, down from its launch price of $299.
The offer is available exclusively for AT&T’s network and includes a free year of Prime.
Coming so quickly after the phone’s July launch and the day before Apple was to debut its latest iPhone, the news raised more than a few eyebrows. Was the price cut in response to sluggish sales — Amazon doesn’t release sales figures — or was it a calculated step in a larger strategy?
It’s safe to say the Fire Phone has not caught on as quickly as Amazon and its shareholders might have liked. Its 3D-like dynamic perspective, though interesting, doesn’t seem to have much practical value.
However, its Firefly technology has earned respect and even caused some trepidation. Its ability to recognize products and efficiently direct users to Amazon to purchase them makes it a shopper’s delight. There is every reason to expect the Fire Phone could be a steady sales generator in the long run.
Also there is this to consider: Amazon has never been a company to make hardware with an eye to actually profiting from device sales. Its Kindle e-reader and Fire tablets were viewed as loss leaders, with the real prize the sale of additional content consumers would buy to consume on them — from the Amazon e-commerce retail ecosystem of course.
Bad Timing? Mission Creep?
“Amazon is banking on the fact that their devices, both Fire Phone and tablet, are shopping carts in your hand or pocket — relying on content revenue to make up for lower device price point,” Gene Signorini, VP of mobile insights at Mobiquity, told the E-Commerce Times.
The timing is off, however, he said.
The 99-cent deal may prompt some consumers to try out the Fire Phone, but it likely won’t result in a significant number of people switching from Apple’s ecosystem, Signorini predicted, “especially during such an exciting announcement time of the iPhone and OS.”
It is also possible that Amazon may have drunk just a little bit of its own Kool-Aid and put too much emphasis on the growth of e-commerce. It is indeed growing — but as recent studies have confirmed, the vast majority — 90 percent — of shopping still takes place in brick-and-mortar stores.
“Mobile technology will play a massive role in the future of shopping — no doubt about it– but we believe that the phone will influence offline sales rather than drive sales on the mobile Web,” Pehr Luedtke, CEO of Spotzot, told the E-Commerce Times.
“The price drop is a very intelligent way for Amazon to get consumers to adopt Amazon technology at scale,” he said. “This is very similar to what they did with Prime. The big difference here is the pool that Amazon is playing in is different. Whereas Prime drove e-commerce sales, Fire is helping consumers shop in the offline world.”
Doomed to Play Catch-Up?
Amazon’s problems may run deeper than just timing or a mixed message about its mission.
It may be that Amazon is out of its depth when it comes to smartphones — which, unlike tablets, come with very high consumer expectations.
“As a content provider, Amazon has mastered half of the business, and has done a [respectable] job with their interface via the Kindle line,” Mike Plugh, a communications professor at Fordham University, told the E-Commerce Times.
“Being a full-fledged member of the elite, however, requires dominance across the board. This is where things get very tough for the kings and queens of content. Content is cheap today. Interface is competitive,” he noted.
In short, the Fire Phone may be a fine device, but it’s always been doomed to play catch-up, given the public’s recognition of more famous phone brands.
“Even the tech companies are struggling to find what’s next,” said Plugh, “by introducing a variety of watches and other wearable tech to stay ahead of the game.”