Amazon's Smartphone Can't Compete With Apple and Samsung

Apps & Software

Published: June 18, 2014 6:39 am

Smartphone penetration among the U.S. population currently stands at about two-thirds. These devices are universally available for prices that are as low as free, so people who without smartphones almost certainly do not want one or cannot afford one.

Amazon.com Inc. (NASDAQ: AMZN) plans to release its own smartphone as a means to form a closer relationship with its customers, most analysts believe. This assumes that people who use Amazon’s e-commerce service, buy and read books on electronic devices, or use its movie and music service are more likely to do so on an Amazon device. However, the Amazon Appstore and its Kindle and multimedia apps already are loaded onto most smartphones, which makes the need for an Amazon product unnecessary in most cases.

Smartphone penetration has stopped growing at a rapid pace. According to comScore data, the growth rate has slowed to about 2% a quarter. Just as important, the same research shows that Apple Inc. (NASDAQ: AAPL) and Samsung have 93% of the market, which makes the chances that another product can do well very unlikely.

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Amazon, despite its powerful brand and army of services, might learn something from HTC and Motorola. Each has the resources to build smartphones with most or all of the features that Apple and Samsung products have. Each has access to major smartphone retail stores. Each has the capacity to spend large sums of money on marketing.

Optimists about the prospects of an Amazon smartphone could argue that its sales will mimic those of the Kindle and Kindle Fire. However, these products were released at the beginning of the popularity of e-reader and tablets. The Amazon smartphone will be released as the cycle of rapid growth in the smartphone industry ends.

Amazon will bank on its brand and tremendous access to tens of millions of customers through Amazon.com. However, most of these people already have a smartphone that they use for Amazon services.

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