Why Amazon's Troubled Fire Phone Failed to Sell

 
 
By Don Reisinger  |  Posted 2014-10-28
 
 
 
 
 
 
 
 
 
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    Why Amazon's Troubled Fire Phone Failed to Sell
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    Why Amazon's Troubled Fire Phone Failed to Sell

    By Don Reisinger
  • Previous
    Exclusive Distribution Deal With AT&T Backfired
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    Exclusive Distribution Deal With AT&T Backfired

    When Amazon announced its Fire Phone, it surprised the industry by saying that its device would be available exclusively to AT&T customers. While Amazon pitched the idea to investors as a way to get preferential treatment in AT&T stores, the plan backfired: Customers from other carriers saw no reason to switch to AT&T just to get a Fire Phone.
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    The Pricing Reflects Demand Issues
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    The Pricing Reflects Demand Issues

    When the Fire Phone launched, it was available for $200 with a two-year contract. Since then, prices have been plummeting. In just two months, AT&T started offering the device for 99 cents with a two-year deal, and O2, the U.K.-based network running Amazon's handset, is offering it for free. So, those who are looking for a deal will at least find one in the Amazon Fire Phone.
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    The Competitive Market Is Difficult
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    The Competitive Market Is Difficult

    The competitive market is extremely difficult for Amazon right now. The company is facing off against not only Apple and its iPhone juggernaut, but also Samsung's Galaxy line of devices, which have proved popular. Add that to the growing popularity of HTC and LG products, and a competitive recipe for disaster soon erupts. Amazon has had trouble maneuvering through that, as its sales seem to show.
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    Apple Demand Is Still Strong in the U.S.
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    Apple Demand Is Still Strong in the U.S.

    As the record-breaking iPhone 6 launch has shown, demand for Apple's smartphone is still extremely strong. Amazon announced the Fire Phone earlier this year and tried to make the argument that it was better than the iPhone 5S. The trouble was, customers were waiting to see what Apple would launch before they made a decision. Judging by Apple's recent sales numbers, we can see which company won that battle.
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    Fire OS Fork of Android Was a Bad Move
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    Fire OS Fork of Android Was a Bad Move

    Some observers have criticized Amazon for shipping the Fire Phone with a forked version of Google's Android called Fire OS instead of with a standard Android build. While Fire OS is an intuitive and responsive system, it's an acquired taste and something that likely turned off potential buyers who expect access to most available Android mobile apps on the market. While Amazon's move to go with a proprietary OS might have worked with its Kindle tablets, it was a bad move with this late entry to smartphone market. Amazon will need to address this issue over time.
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    Some of the Features Scared Privacy-Seekers
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    Some of the Features Scared Privacy-Seekers

    Some industry pundits argued that Firefly, which allows users to take pictures of just about anything to do everything from price-checking to storing new contacts, failed to adequately protect user privacy. The issue is that Firefly sends all photos taken and stored on the device through Amazon's data-analysis services on its servers to compile any potentially useful market data. While Amazon has said that users can delete photos and audio recordings from Firefly, critics have said that the opportunity for the company to use that data to serve ads and other content is too high. Whether it's true or not is up for debate, but over the summer, the privacy question was widely discussed in the industry.
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    The Device's Solid Design Couldn't Overcome the Lack of a Track Record
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    The Device's Solid Design Couldn't Overcome the Lack of a Track Record

    When examining the Fire Phone's design, there are, as with any device, many different perspectives. In general, however, the Fire Phone received solid reviews from testers, who thought that the device's design was quite nice. Many consumers who bought the product agreed. But its decent reception didn't translate into robust sales.
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    Smartphone Buyers Have Plenty of Choices at AT&T
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    Smartphone Buyers Have Plenty of Choices at AT&T

    Let's face it. Most people who get their mobile service from AT&T are used to ordering Apple iOS or standard Android devices and have many different models to choose from. It would be a major decision to switch to the unfamiliar Fire OS, especially if they have never worked with an Amazon Kindle tablet. According to some analysts, the lack of experience with Fire OS hurt Amazon's AT&T store sales.
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    Amazon Didn't Put Enough Emphasis on Novel Features
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    Amazon Didn't Put Enough Emphasis on Novel Features

    Debate rages over whether Amazon did enough to educate its customers about the benefits of buying the Fire Phone. While it was clear that the device was nice-looking and had a solid display, other features such as Mayday and Firefly weren't necessarily highlighted as well as they could have been when the smartphone was first introduced. But it's hard to say whether that was a major factor in the phone's early market reception.
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    Appstore Inventory Is Small Compared With Competitors
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    Appstore Inventory Is Small Compared With Competitors

    Amazon's Appstore inventory is rather small compared with those operated by Apple and Google. Amazon's marketplace has about 240,000 apps at last count, which certainly looks like a lot. But it pales in comparison to the more than 1.3 million in Apple's App Store and the Google Play marketplace. That could have been one of the issues that affected Fire Phone sales from the outset.
 

Amazon's Fire Phone, which the cloud retailer launched earlier this year with an exclusive partnership with AT&T, was at the time the big news story in mobile. It was Amazon's first smartphone launch. It included several features smartphone buyers typically won't find in a mobile handset. And Amazon pushed it as the next big thing in smartphones, capable of taking on the likes of Apple's iPhone and Samsung's line of Galaxy devices. However, it appears the Fire Phone has failed to catch on in the crowded market. Amazon on Oct. 23 announced that it would take a $170 million charge to write down the costs associated with the Fire Phone. Furthermore, Amazon reported that it had $83 million worth of unsold Fire Phones on hand at the end of the third quarter, demonstrating just how poorly the device was received compared with the iPhone 6, which Apple has called the biggest iPhone launch in history. Naturally, Amazon hasn't gone into detail as to why the Fire Phone has failed to turn on buyers. But that hasn't stopped analysts from chiming in on what might be going on. This eWEEK slide show shares some views on what went wrong with the Fire Phone.

 
 
 
 
 
Don Reisinger is a freelance technology columnist. He started writing about technology for Ziff-Davis' Gearlog.com. Since then, he has written extremely popular columns for CNET.com, Computerworld, InformationWeek, and others. He has appeared numerous times on national television to share his expertise with viewers. You can follow his every move at http://twitter.com/donreisinger.
 
 
 
 
 
 

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