Consumer Electronics
Amazon Fire Phone
Amazon's premium-priced smartphone launched into a mature two-OS market with no compelling advantage, and was written off within months.
Narrative
The story
The ambition
Amazon set out to own the smartphone the way it owned e-readers and tablets — a device that would put its store and services in every pocket, with novel features like a 3D "Dynamic Perspective" display and Firefly product recognition.
The rise
Amazon had momentum from cheap, successful Fire tablets and the reach to launch a phone with fanfare. Expectations were high that it could translate that into hardware people carried everywhere.
The cracks
It launched at premium-phone prices with no compelling advantage over the iPhone or Android, on a forked version of Android that lacked Google's apps and locked buyers into Amazon's ecosystem. Reviews were mediocre and sales were dismal.
The collapse
Within about six weeks Amazon cut the price to 99 cents, and in October 2014 it took a $170 million write-down, including tens of millions in unsold inventory. The phone was discontinued in 2015.
The aftermath
Amazon absorbed the loss and folded the effort's lessons into Alexa and its devices strategy. The Fire Phone stands as a case of a strong company misreading how little reason customers had to switch.
The lessons
A new entrant to an entrenched market needs a reason to switch that outweighs the cost of leaving. Pricing at parity with the leaders while offering less — and cutting buyers off from the apps they rely on — is a fast way to unsold inventory.
Causal timeline
Failure Anatomy
- 2014-07
- 2014-09
Price collapses within weeks
As sales disappointed, Amazon cut the price to 99 cents about six weeks in. [3]
No real demand - 2014-10
$170 million write-down
In October 2014 Amazon took a $170M charge, including $83M of unsold Fire Phones. [4]
Unsustainable economics - 2015
Discontinued
Amazon stopped selling the Fire Phone in 2015. [5]
Structured analysis
What Went Wrong
Root causes
Premium price, no compelling advantage. The Fire Phone cost as much as an iPhone or Galaxy while offering buyers little reason to choose it. [1] [2]
Cut off from Google's ecosystem. Running a forked Android without the Google Play Store, the phone lacked the apps customers expected and locked them into Amazon's services. [2]
Contributing factors
Entrenched incumbents. The iPhone and mainstream Android phones already owned the market the Fire Phone entered. [2]
An undifferentiated entry into a mature market. Amazon entered an established two-OS smartphone market with no compelling advantage over the incumbents. [2]
Immediate trigger
Dismal sales and a write-down. Weak sales forced a price collapse and a $170 million inventory write-down within months. [4]
Visible symptoms
Price cut to 99 cents within weeks. Amazon slashed the subsidized price to 99 cents about six weeks after launch. [3]
Warning signs
Priced at parity with premium phones. The Fire Phone launched at the same price as flagship iPhones and Galaxys, with no compelling advantage to justify switching. [1] [2]
Affected groups
Evidence
Claims & sources
Every numbered marker in the analysis links to the claim it rests on, and each claim to its sources.
- [1]
The Amazon Fire Phone launched on July 25, 2014 as an AT&T exclusive, priced at $199 with a two-year contract ($649 unlocked).
- [2]
The Fire Phone ran a forked version of Android without the Google Play Store, locking buyers into Amazon's ecosystem and offering no compelling advantage over the iPhone or mainstream Android phones.
Moderate Reported explanation Fire Phone — Wikipedia Fire Phone: Amazon's $170 million Summer Fiasco - [3]
About six weeks after launch, Amazon cut the subsidized price of the Fire Phone to 99 cents.
- [4]
In October 2014 Amazon took a $170 million write-down related to the Fire Phone, including about $83 million of unsold inventory.
- [5]
Amazon discontinued the Fire Phone in 2015.
Sources
Fire Phone — Wikipedia
Wikipedia
Fire Phone: Amazon's $170 million Summer Fiasco
Harvard Business School Digital Initiative