Can amazon reinvent itself as a hardware company

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Information about Can amazon reinvent itself as a hardware company

Published on January 30, 2016

Author: JasonFernandes8

Source: slideshare.net

1. 156 GlobeAsia June 2013 Technology he tech world is abuzz lately with rumors that Amazon is poised to release a slew of new hardware products this year. As early as 2011, a Citigroup report predicted an Amazon-branded phone would be released by the fourth quarter of 2012. Talk died down when Q4 came and went last year, but the matter was resurrected when a Wall Street Journal report, released this month, predicted that not one, but two smartphones and an audio streaming device would soon find their way to the market, courtesy of the shopping giant. This report, coupled with news from CNN claiming that Amazon is also prepping a set-top box, has left Amazon watchers intrigued but also puzzled as to how these products connect with Amazon’s core vision. People familiar with the company’s plans have said that the new products are just a few elements in Amazon’s new strategy of making a broader push into the hardware market. The devices, currently in development at Amazon’s Lab126 facility in Cupertino, California are referred to internally as Project A, B, C and D or jointly as the “alphabet” projects. Whether these new products will be a hit or a miss is anybody’s guess but the answer depends mostly on whether Amazon is able to tie in its existing offerings sufficiently well with their hardware plans, in order to produce devices that are compelling in a marketplace that’s likely saturated. Amazon’s strategy with regard to hardware is to sell these devices almost at cost, or even as a loss leader, with the aim of pushing its other products and services to the consumer. As Jeff Bezos, chief executive officer of Amazon puts it: “We want to make money when people use our devices, not when they buy them.” Most first-year business students will tell you that Amazon’s success with the Kindle has little to do with the device itself, and everything to do with the thousands of Amazon Prime subscriptions, books and other goods it has successfully pushed to its Kindle users worldwide. Fortunately for Amazon, a set top box dovetails nicely with its existing lineup. Amazon is already in the business of producing web- only television shows, in addition to streaming and selling downloadable movies on its website. A set-top box would be a perfect complement, allowing the company to increase sales and rentals from its vast collection of popular movies while also providing a platform to showcase in-house content. Another product that would work well with Amazon’s current lineup is the audio streaming device they are reportedly designing. Since Amazon already has an extensive catalog of popular music that it sells and streams, a music device just makes sense. The enormously-popular Cloud Player service would allow Amazon to apply the same strategy it has used (with much success) on the Kindle, to the music market. The proposed device would again permit Amazon to sell its device at or below cost, in order to push subscriptions to the streaming service. From a user perspective as well, Amazon would have a unique and compelling angle because a music device, presumably integrated with the Amazon streaming service, would offer users a synergy that competitors are unable to match. If it is able to implement these plans, Amazon could well have a winner on its hands, if not on sales of its devices, then at least in terms of subscription fees.   A 3D phone might be a tough sell Unfortunately, the same cannot be said for Amazon’s other plans. It’s well known that Amazon.com often sells some wacky things. An article this week in the Daily Mail reported that people have purchased everything from Bongs and Nitrous Oxide to Salvia (a legal hallucinogenic drug supposedly stronger than LSD) on Amazon. While certainly controversial, suhadi Can Amazon reinvent itself as a hardware company?

2. June 2013 GlobeAsia 157 By Jason Fernandes   compared to recent reports that Amazon is working on a new smartphone with a 3D display, even bongs seem downright reasonable. The Wall Street Journal report (also picked up by Wired, IBtimes and other sources) indicates that the product would apparently not require glasses and instead rely on eye tracking technology to project a different image to  each eye, causing the image to appear to hover like a three dimensional hologram. Star Wars fantasies aside, this is just a terrible idea. While a 3D cell phone might sound great in theory, like palm-shaped islands in Dubai, electric cars or Jimmy Carter, in practice this would likely be an unmitigated failure. Anybody who has used the Galaxy S4 will tell you, eye tracking technology is just not there yet. It’s not enough for a technology to kind of work – it has to be just right in order to cross the threshold into mass adoption and the technology, as it stands today, is far from perfect. Also, as movie directors are slowly starting to figure out, nobody really cares about 3D anymore. The technology has never quite made it out of the gimmick phase and it’s doubtful that Amazon would do any better. Even if it worked right, would people really want their private bank details or emails hovering in the air in front of them in public? Privacy issues aside, one would need a massive battery in order to power the technology. Already, most smartphones are barely eking out 24- hour cycles. Add 3D to the mix and Whether new products will be a hit or a miss is anybody’s guess but the answer depends on whether Amazon is able to tie in its existing offerings well with their hardware plans, to produce devices that are compelling in a marketplace that’s likely saturated.

3. 158 GlobeAsia June 2013 Technology you might as well walk around with a giant extension cord or car battery. Finally, would developers be enthusiastic about developing 3D apps for the Kindle specifically? Developers already have to worry about the four major smartphone platforms and it’s unlikely they would respond well to a fifth that places such a heavy emphasis on 3D. More importantly perhaps is that a cellphone is too much of a departure from Amazon’s core values. As mentioned previously, the Kindle worked because while based on the Android operating system, it is optimized for eBook readers and of course, Amazon sells eBooks. It’s questionable however, what kind of value a 3D cellphone would add to a shopping service like Amazon.   The boo.com effect The most obvious question is whether people would be more inclined to buy products they are able to view in 3D. This question of course, was answered in the negative by boo.com, the company that CNET referred to as the greatest dotcom bust in history.  Boo.com’s main selling point was its 3D-enabled viewer that permitted customers to view their potential purchases from every angle. Unfortunately, apart from other issues, it turned out that customers really didn’t care one way or the other. Amazon would likely have better luck selling people an extra appendix. Many online shoppers have already seen the product they intend to pur- chase in person before going online. Others would likely be satisfied with multiple pictures and detailed infor- mation about the dimensions of the product. Like boo.com, a 3D cellphone from Amazon would essentially be a solution in search of a problem.   Even if one were feeling charitable and willing to buy into Amazon’s premise, many hurdles remain. Unlike most online stores, Amazon has several retailers that sell their products through the Amazon Marketplace. How many of them would spare the expense to photograph their products in 3D? Even if most retailers were able to make this massive investment, there would be vast inconsistencies in the quality of these 3D photographs, due to variations in the cameras and the methods used to catalogue these goods across different retailers.   Focus on products that are hard to compete with In order to thrive, Amazon needs to create products where they have a competitive advantage vis a vis other, more established consumer electronic device manufacturers. To extend the Kindle example, Amazon was successful at eBook readers because there was no fear that Samsung would ever compete by launching a Samsung bookstore. While Amazon could certainly integrate the Kindle store into its cellphone, people rarely use their cellphones to read books or newspapers unless absolutely necessary. On the other hand, a 3D cellphone would have a better chance if it were to be released by a company like Samsung or HTC. A more established cellphone provider would have a better R&D budget to devote to mobile technology, as well as a better distribution network and pre-existing relationships with major carriers. If the cellphone’s only selling point is its 3D holographic display, there is nothing stopping bigger players from releasing similar or better products, taking the wind right out of Amazon’s sails. Companies like HTC and Sam- sung spend their entire R&D budgets on producing better mobile devices and would likely have massive resourc- es they could devote solely to squeezing out Amazon as a competitor. Of late, Amazon’s position in the market has exploded, even when you consider where it was just a few short years ago. The growth is mainly due to the fact that Amazon understands that its core business is shopping. Thus far, even the hardware products it has released essentially extend and enhance the existing brand. Amazon’s plans for a set-top box and an audio streaming device would work perfectly with its other products, and are devices that would comple- ment and lead to better adoption of their existing services. The foray into the cellphone market, on the other hand, is a bad idea. These plans, particularly those related to the rumored 3D cellphone, are ill-conceived and do nothing to extend the Amazon brand. It’s true that a brand’s identity could evolve and indeed, Amazon went from an online bookstore to the Wal-Mart of online shopping. It would not make sense however, to mutate into a cellphone manufac- turer, especially at this point when the market is so crowded. Unless the de- vices can offer something unique when paired with its other services, Amazon should steer clear of producing tech- nology for technology’s sake. Jason Fernandes is a tech commentator and the founder of SmartKlock. Like boo.com, a 3D cell- phone from Amazon would essentially be a solution in search of a problem.

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