Amazon Fire Phone emerges as stong challnger to smartphone market

In the summer of 1994, while going toward Seattle in the passenger seat of 1988 Chevrolet Blazer driven by his wife, Jeff Bezos had confidence that the Internet would change the world. He just quit a highly-paid job at a hedge fund company on Wall Street but there was no regret left with him. In July of the same year, he registered a company name "Cadabra," which is an incantation used as a magic word, in the state of Washington. Next year, the company changed its name to Amazon.com and went through continuous growth, as if enchanted, to become the world’s largest Internet sales retailer and global-leading IT company.

In July this year, which marks the 20th anniversary since its start of business as an Internet bookstore, Amazon.com will be on a meaningful test bed with beginning of sales of Fire Phone, its first mobile phone, on July 25. Fire Phone is the first premium product released by Amazon, which always depends on more affordable prices as source of its competitiveness.

On May 18 (in the local time), Jeff Bezos appeared on the stage in navy jacket and blue jeans and introduced Fire Phone for more than one hour with his trademark hearty laughs. He seemed confident. It seemed that he doesn’t care about negative events around Amazon this year, such as dropped stock price and conflicts with contents providers.

However, the market and industry showed negative response to the announcement of Fire Phone. Industry insiders pointed out Fire Phone’s high price, 649 U.S. dollars or 199 dollars on a two-year contract, as a negative factor that hampers its competition with IPhone or Galaxy 5. Another weak point of Fire Phone was that the number of applications is one-fifth of that of android phones or IPhone.

Recently, mobile phone market has become a market in the fiercest competition. Analysts say there will be no more innovation of the product itself. Facebook faced a failure after jumping into the mobile market, and Google’s merger of Motorola only ended up with sales to Chinese technology company Lenovo in two years.

For the past 20 years, Amazon has been enjoying streaks of success with every product releases including an electronic book Kindle, tablet PC, and Amazon Web Service (AWS). What will be waiting for Fire Phone in the future?

The answer seems to lie in customers. Fire Phone is not just a mobile phone. It is more like a mobile shopping device that comes with phone functionality. One example is "Fire Fly," one of the unique features of Fire Phone. If a user pushes a button on the side of the phone, it allows finding the product of interest automatically through the cloud service and immediately makes a direct purchase in Amazon.com. For the past 20 years, Amazon has been focusing on providing customers with more convenient purchase of more affordable priced products at faster shipment. With Fire Phone, Amazon put one step ahead of other competitors in the mobile shopping sector based on its expertise to offer "one click" for the most convenient shopping experience in the world.

Negative forecast on the initial price of Fire Phone seems too hasty. The price will go down soon for sure. Rather, attention needs to be paid to the number of loyal customers of Amazon, which amounts to 250 million. Two thirds of e-commerce sales at Amazon come from re-purchasing. The number of prime customers, who deserve to be called "Amazon mania" by eagerly paying the annual fee of 99 dollars, is up to 20 million. Let’s say only 10 percent of the prime customers buy Fire Phone, which makes sales of 2 million. In addition to that, what if we count numerous mobile contents to be provided by Amazon?

It is fair to say that Samsung and Apple met a strong challenger.