- Fire Phone is overpriced with lower specs than the iPhone 5s and Galaxy S5.
- Some features are gimmicky and some are useful but nothing compelling over other high-end phones.
- Restriction to one carrier, AT&T, and lack of Google core services will turn off potential customers.
- Sales volume slower than Apple TV.
Apple (NASDAQ:AAPL) is a giant in the smartphone and ecosystem business and the most successful. There's no question that every competitor strives to beat Apple with their own versions of smartphones with unique features. Google (NASDAQ:GOOG) provides the ecosystems for most smartphone vendors since Android is the largest open platform. Lately, some vendors even tried to make their own ecosystem instead of using Google Android platform. One of them, surprisingly, is Amazon (NASDAQ:AMZN) jumping into the smartphone business with its Fire phone. Keep in mind FireOS is traditionally based off of Android and modified by Amazon. It doesn't have native support of Android Google Play, Google Maps, GDrive or any of the core Google services.
A New Competitor
If you go on Amazon's website, the smartphone will be plastered all over your screen. Even if you look up anything else, you will still see it in the upper right corner of your browser. Amazon wants you to know about this phone and buy it. It's not a subliminal message. It's in your face as long as you're in their domain. Their marketing is very direct and shows how serious they are about this phone.
Untraditional Pricing, Mid Specs Chipset And Gimmicky Features
Amazon's Fire Phone retail pricing is a whopping $650. That's a very strange move coming from Amazon, which is known for offering value oriented products and services. Coincidentally, the iPhone 5s also retails for the same price. Price wise, the Fire phone is a direct competitor to the iPhone 5s.
There are 3 main features that differentiated the Fire phone from competitors to justify its price:
1. Dynamic Perspective
First, let me say that dynamic perspective is not new. Anyone that has an iPad or iPhone will know that Apple has already implemented it in their devices. The Xbox's Kinect sensors does the same thing to judge body and head movements. My wallpaper and many apps on my iPhone and iPad have the same dynamic perspective as the Fire Phone. The main difference being that Amazon's phone has 4 extra cameras making it much more precise. This feature is bearing the same hype as Samsung's eye scrolling feature in their Galaxy S4 phone. Sounds great in paper and marketing but ultimately a gimmick feature after using it. You'll look silly in public twitching your head and phone like you have some kind of mental problem.
The only features in electronics that seem to have longevity are passive features. For example, Apple iPhone 5s fingerprint scanner is extremely passive. You press the home button like any other iPhone and it just works. Samsung's fingerprint scanner is mostly annoying because you have to slide your finger thus causing the phone to jump out of your hand. Samsung's eye scrolling feature didn't catch on either. That's more passive than head movements and tilting but still didn't catch on. The best I could say about dynamic perspective and tilting is that it's a cool feature but will eventually annoy users.
Firefly is nothing new either. It had been done years ago by Google and was called Google Goggles. I believe Firefly is better and more refined but it's still not really a compelling feature. It's also nothing a competitor can't do. Mayday is probably the only unique feature other smartphone producers don't offer.
In fact, the one thing about the Fire Phone that I find most value in is its 1 year Amazon Prime for free. That's a $99 value that I know will be of use to me but it is a limited time offer.
The Fire Phone uses the Snapdragon 800, which is surpassed by other high-end phones already with similar price. Apple's A7 processor is still arguably the fastest mobile processor right now depending on how you benchmark. Everything else is just subpar for a phone that just released. You would expect something better for a $650 phone.
Restrictions Restrictions Restrictions!
Buying the Fire Phone means you locked yourself into 2 specific systems:
2. Amazon FireOS ecosystem
AT&T is known for their high pricing along with Verizon. This is quite contrary to Amazon's business model of offering value. You think Amazon would go straight for T-Mobile (NYSE:TMUS), which offers the most value of any carrier right now. Since T-Mobile is shaking up the industry, that move would probably give their phone more publicity. It would make a lot more sense that a value-oriented reseller would offer their customers value-oriented plans and phones. It's not the case here at all. Worst of all, you have no choice besides not getting into it at all. That is what I think most people would do. Asking people to ditch their current carrier and plan for a phone is a little far fetched.
People in places where AT&T's coverage is bad won't buy it either. Let's not forget AT&T had the worst customer satisfaction rating 3 years in a row until they turned it around in 2013. I'm sure some people are not easily swayed if they've been burned by AT&T before.
Amazon's FireOS is known for 2 things:
1. Content consumption
Perhaps the most annoying thing about FireOS is that there's no Google Play Store. There's not much customization for users compared to Android. Lacking Google Play is perhaps the biggest turn off for many potential buyers. Amazon's apps collection is just not as large.
FireOS is very good at providing you content and it's always trying to sell you something. It's very good at collecting your data and guessing what you want. I don't think I want a phone that does what my Kindle Fire does. Smartphones are meant to help people be more productive. I will only buy so much regardless of how much advertising is aimed at me. That is because my income, like most people, is limited. The FireOS and overall Amazon ecosystem is more about content consumption/sales and can eventually get annoying. If you already have a Kindle Fire, there's not much reason to get this phone.
The Sales Results
Despite heavy marketing and a compelling list of features, the overpriced and restrictive Fire Phone's sales slipped to 24 in Amazon's electronics category after just a few days. This is from its highest rank of 4th, and was 16th on June 23rd. Normally, an iPhone or Galaxy phone would face supply shortage and remain high in the ranking for a few weeks and slowly slip. The Fire Phone is losing to low volume products by their competitors like the iPad mini, Apple TV, and various routers and Kindle tablets. This is a clear sign that people are not entertained with what is being offered.
I don't know why Amazon decided to ditch their traditional business model that works. Providing customers around the world with value and product exposure in an online store is their talent. Prime membership provided unmatched value and boosted sales dramatically. The Kindle Fire offered value no other tablet maker can beat. But this smartphone is going against the grain. Maybe Bezos became overconfident of their customer loyalty and FireOS ecosystems. For people who seek value, their only loyalty is value. They won't follow Amazon if they start charging Apple prices and the results speak for themselves. It can't even beat Apple TV sales in its launch month. Apple TV sales are so low compared to iPhone and iPads that it is a smidgen of the overall volume and revenue.
I believe that sales will pick up somewhat if the price drops to $450 or free with a subsidized plan. But that won't go very far unless AT&T also lowers their plan pricing. With so many restrictions, I just don't see why loyal customers would make the switch. In reality, there's not much value being offered here to existing or new Amazon members. There's no real value added to the Fire Phone over any other phone besides a year of Mayday and Prime. Why make the switch and be confined to a single carrier and a restrictive ecosystem? It doesn't make much sense from a consumer standpoint. I don't think Amazon did their homework on this one.
The bottom line is the Fire Phone will be a flop unless Amazon drastically changes its pricing and/or open up to more carriers.
Additional disclosure: I own AAPL call options