Amazon exec blames lackluster Fire Phone sales on pricing, says project will continue

Posted:
in iPhone edited November 2014
An Amazon executive on Thursday said the Fire Phone's failure was a pricing issue and that the company plans to move forward with next-generation products, even after eating a $170 million charge largely associated with the device's poor market performance and supplier costs.



In an interview with Fortune, Amazon SVP of Devices David Limp said initial Fire smartphone demand was lower than expected -- the company has $83 million worth of unsold supply -- due to an overzealous pricing model. The e-commerce giant usually positions first-party products like the Kindle Fire tablet series at price tiers below the competition, making up for hardware costs with content sales.

"We didn't get the price right," Limp said. "I think people come to expect a great value, and we sort of mismatched expectations. We thought we had it right. But we're also willing to say, 'we missed.' And so we corrected."

Amazon did indeed make a correction in September, amounting to a massive cut in subsidized carrier pricing for the 32GB model, from $199 to only 99 cents. The move came one day prior to Apple's iPhone 6 and 6 Plus unveiling.

"When you're taking risks, they're not all going to pay off. Those are the facts," he said.

Despite the early setbacks, Amazon is looking to push forward with its smartphone initiative. Limp said Amazon will keep iterating on software, learning as it goes. He also noted other Amazon releases like the Fire TV and Kindle Fire tablets are "very successful," but as usual would not reveal actual sales numbers.

Fire Phone was first announced in June after rumors suggested the retailer was working on an entry into the smartphone business. Settings itself apart from competing devices, Fire Phone sports a unique three-dimensional user interface that dynamically adjusts based on multiple head-tracking front-facing cameras.

As with other Fire products, the Fire Phone boasts features intrinsically tied with Amazon's online sales services, in this case "Firefly," a system capable of recognizing physical media, songs, TV shows, QR codes and more.
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Comments

  • Reply 1 of 88
    boredumbboredumb Posts: 1,418member



    Yep - that's the whole problem:  charging for it...

  • Reply 2 of 88
    The only way Amazon can sell these phones is with a fire sale.
  • Reply 3 of 88
    I sense that Amazon doesn't know what to do anymore. They've really gone crazy over the last year. Heck, they're throwing out new hardware by the day, today it's a Kindle Fire HD 6 for Kids, which they promise to replace no questions asked if a kid breaks it.

    Starting to get a death spiral feeling from them. Or at the very least, that Bezos is losing it.
  • Reply 4 of 88
    quadra 610quadra 610 Posts: 6,756member
    This device is DONE.

    Under current mobile market dynamics, you've got but a small window to make a big impact. No matter what you're offering, if your device(s) fail to capture consumer interest within that timeframe, you're done.

    Bringing back essentially *the same thing* is foolhardy, and a complete waste of resources. The price of this sort of failure is that if you want to return for a second try, you'll have to bring something totally game-changing to the table. If not, consumers will simply continue to put your desperate attempts on ignore.

    This is what Microsoft hasn't learned yet, and by the looks of it Amazon will fare no better.
  • Reply 5 of 88
    dasanman69dasanman69 Posts: 13,001member
    Amazon should follow the advice I used to give my oft in trouble step son. "Whenever you get an idea, don't do it" :lol:
  • Reply 6 of 88
    rogifanrogifan Posts: 10,669member
    I sense that Amazon doesn't know what to do anymore. They've really gone crazy over the last year. Heck, they're throwing out new hardware by the day, today it's a Kindle Fire HD 6 for Kids, which they promise to replace no questions asked if a kid breaks it.

    Starting to get a death spiral feeling from them. Or at the very least, that Bezos is losing it.
    Bozos has a massive ego and he thinks he's the next Steve Jobs. All these hardware projects are just to feed his ego so he can get up on stage and be Mr. salesman like Steve Jobs was.
  • Reply 7 of 88

    What this camera really needs is more cameras. Maybe some internal cameras to show the chips and stuff. Yeah, I think that would do it

  • Reply 8 of 88
    It wasn't bad, until you realized it was $650, even $500 would have been to high, at the time it should have competed with nexus 9.
  • Reply 9 of 88
    jungmarkjungmark Posts: 6,866member
    "We didn't get the price right" was the reason? Sure it was. How about you didn't get the product right. Even if you give shit away for free, no one's gonna want that.
  • Reply 10 of 88
    inklinginkling Posts: 731member
    I'd hoped Amazon would break with all the irritations of the current cellphone market. No such luck. Just another cell phone but with that silly fake 3D stuff. That and not price is why if failed.
  • Reply 11 of 88

    Might be the children dressed up as 35 year old hipsters in the commercials for the Fire too, with the condescending irony.  Just be an online store Amazon, no need to create so much hardware in an already saturated market, do what you do best.  By letting me drunk shop at 2 AM Saturdays when I come home from the local bar, then being surprised on Monday morning with a gift from my drunk self. 

  • Reply 12 of 88
    Quote:

    Originally Posted by jungmark View Post



    "We didn't get the price right" was the reason? Sure it was. How about you didn't get the product right. Even if you give shit away for free, no one's gonna want that.

     

    No shit!

  • Reply 13 of 88

    I know a lot of people discuss how Amazon never exposes actual sales numbers to the world, and just tell us how great things are going. Well, just seconds before I posted here, I checked the hot stuff at Alexa "http://www.alexa.com/whatshot" and on the hot products Top Ten list are seven Amazon hardware products with the Amazon Fire Phone 32GB being #3 on the list:

    Hot Products


    1. 1. Fire TV Stick

    2. 2. Fruit Ninja

    3. 3. Amazon Fire Phone, 32GB

    4. 4. Culligan WSH-C125 Wall-Mount 10

    5. 5. HSI 1" CERAMIC TOURMALINE IONIC FLAT IRON HAIR STRAIGHTENER Free Bio Silk Sample

    6. 6. Amazon Fire TV

    7. 7. Fire HDX 8.9 Tablet, Wi-Fi

    8. 8. Fire HD Kids Edition Tablet

    9. 9. Kindle Fire HDX 7" Tablet

    10. 10. Kindle Voyage

     

     I wonder how "hot" these things really are in light of the above loss/mea culpa

  • Reply 14 of 88

    Even if Jeff gave it away, which it seems he will, I still wouldn't want it.  

     

    After all he pandered to kids so let the kids play with this "toy".

  • Reply 15 of 88

    if pricing was the problem, could they not just change it right now? it is their handset. or maybe they could think of another handset maker that used a lot of gimmicks that is not fairing very well right now that also lowers its pricing. and since they did change their pricing with little effect.

    it is not the price, it is the handset. 

    stick with what you know, trying to undercut publishing companies.

  • Reply 16 of 88
    Quote:

    Originally Posted by dasanman69 View Post



    Amazon should follow the advice I used to give my oft in trouble step son. "Whenever you get an idea, don't do it" image



    that's harsh.

     

    I think the real issue is defining your niche.

     

    Apple isn't trying to be amazon.  or google.  or make washing machines like Samsung.

     

    Even with Apple Pay, Apple is playing the enabling technology.  It's not trying to replace credit cards (yet), or be the bank (yet).  It's not even able to really tell what is happening with the transaction.   It's just in a great position to be trusted with the delivery of an account identity.  That's all.

     

    Apple sells a great end user computer experience.   that's it.

     

    Amazon can be a great commerce engine.

    Amazon can be a great e-content (books, movies, music)  distributor on top of that engine.   

    Amazon can make customer fulfillment experience great, by ruthlessly reducing the friction of my purchase from click to box drop on my door step.

    Amazon can even be a great cloud computing platform selling it's internal scaling capabilities to others.

     

    Those were really great ideas.

     

    Even the Kindle is a really good idea (along the lines of seamless fulfillment).   And it defines another end of the Apple competitive spectrum.  The purely consumptive reading device.   Kindle is likely the largest competitor to the iPad Mini at this point.

     

    But when it tries to be a full fledged mobile computer maker (like Microsoft, like Google), it's getting well outside it's zone.

  • Reply 17 of 88
    Quote:

    Originally Posted by Rogifan View Post





    Bozos has a massive ego and he thinks he's the next Steve Jobs. All these hardware projects are just to feed his ego so he can get up on stage and be Mr. salesman like Steve Jobs was.

    He does have an ego, but their strategy this year doesn't even reflect common sense. They don't even put out a press release, just have it show up on the homepage.

     

    Quote:

    Originally Posted by martimus3060 View Post

     

    I know a lot of people discuss how Amazon never exposes actual sales numbers to the world, and just tell us how great things are going. Well, just seconds before I posted here, I checked the hot stuff at Alexa "http://www.alexa.com/whatshot" and on the hot products Top Ten list are seven Amazon hardware products with the Amazon Fire Phone 32GB being #3 on the list:

    Hot Products


    1. 1. Fire TV Stick

    2. 2. Fruit Ninja

    3. 3. Amazon Fire Phone, 32GB

    4. 4. Culligan WSH-C125 Wall-Mount 10

    5. 5. HSI 1" CERAMIC TOURMALINE IONIC FLAT IRON HAIR STRAIGHTENER Free Bio Silk Sample

    6. 6. Amazon Fire TV

    7. 7. Fire HDX 8.9 Tablet, Wi-Fi

    8. 8. Fire HD Kids Edition Tablet

    9. 9. Kindle Fire HDX 7" Tablet

    10. 10. Kindle Voyage

     

     I wonder how "hot" these things really are in light of the above loss/mea culpa




    Of course they're "hot", they have "fire" in the name! :D

  • Reply 18 of 88
    Quote:

    Originally Posted by punkndrublic View Post

     

    Might be the children dressed up as 35 year old hipsters in the commercials for the Fire too, with the condescending irony.  Just be an online store Amazon, no need to create so much hardware in an already saturated market, do what you do best.  By letting me drunk shop at 2 AM Saturdays when I come home from the local bar, then being surprised on Monday morning with a gift from my drunk self. 




    I found this ad extremely annoying.  Made the cast and audience look like idiots.  Something you would expect from Jeff, and he didn't disappoint!

  • Reply 19 of 88

    They made a deliberate choice to align it with the price of top tier devices (iPhone, Galaxy S, LG G2...) possibly not so much in order to make money, but to create the perception that it was a top of the line product and not a store special.

    Unfortunately, most of its features are aimed at making you spend more money on Amazon... which would justify a heavily discounted price.

    The rest of the features, while being somewhat interesting, bring absolutely zero value to the user.

     

    Want to sell it? Price the 64GB version at $350, which should have been the price from the beginning.

  • Reply 20 of 88
    512ke512ke Posts: 782member

    You guys, you simply don't understand Amazon's business strategy.  They intended to sell very few Fire Phones.  Now they intend to give them away at a loss and lose as much money as possible, in order to grow market share and make money one day in the magical future.

     

    Don't you know anything about business?  (I learned everything I know about business from Businessinsider, which is to say, not much lol...)

     

    /s

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