Amazon Phone's Big Advantage? Customers

Consumer Electronics

Published: June 5, 2014 6:31 am

Amazon.com Inc. (NASDAQ: AMZN) could release a new smartphone in the next few days that has been described as the first with a 3D screen, a Samsung Galaxy killer and its answer to the iPhone 6. Features will not be as much an advantage as Amazon’s customer base and marketing machine.

Among many experts, the first reaction to the phone has been that Amazon has entered the market too late. The best it can do is what LG and HTC have done — operate in the shadows of market leaders Samsung and Apple Inc. (NASDAQ: AAPL) and take the losses that come with that position. Maybe the phone can be a loss leader that will help Amazon’s core premium video service and its huge e-commerce operations. However, the product’s advantages to the company will never extend beyond that.

To look at the potential future of the phone, observers need go no further than the Kindle. Released in 2007, it was nothing beyond a cheap e-reader. Then it morphed into a tablet and has become worthy competition to the iPad. Barnes & Noble Inc. (NYSE: BKS) released its Nook e-reader a little later. Barnes & Noble did not have the customer base to do any more than fail.

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Amazon.com had 103 million unique visitors in April, according to comScore. That only includes desktop visitors. People who come to the site via smartphones have to add tens of millions to the number. Amazon sold more than $7 billion in consumer electronics to that audience in the most recent quarter it reported. That included Apple products like the MacBook. In other words, Amazon knows how to sell consumer electronics.

The front page of Amazon.com has been a billboard for the Kindle family off and on for seven years. It is impossible to imagine that fruits of that level of exposure. Only Apple can come close to matching this. Even Samsung does not have this kind of “front door” to market its products.

The new Amazon phone might be the most feature-rich ever released, or it could only be a little more than ordinary. Either way, Amazon will be able to get it as much as exposure as any smartphone launch since the first iPhone.

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