Amazon Fire Phone Costs Amazon Big Time
Amazon’s entrance into the smartphone devices market is marked with the release and introduction of their brand new Fire phone back in July. Despite its attractive price tag and some cool new features related to Amazon the sales of the device has been slow at best. May not be a big deal as Amazon’s core business is not in the devices market, true. However the unsold Fire phones make up of about $38 million (RM124.36 million) of Amazon’s warehouse by the end of the third quarter. This unsold goods affects Amazon’s third quarter earnings/loss report in a big way.
Amazon has not been coping well with their profit/loss reports over the past year and this year is no different. For their third quarter they reported a loss of $437 million (RM1.43 billion). That is no small amount, but here is the bad news for Amazon; over a quarter of loss made is the contribution from Amazon’s Fire phone that is not selling. They estimated that the costs involved with the unsold inventory of the Fire phone amounts to about $170 million (RM556.33 million). With the lack luster sales of the device as well they are expecting a bad fourth quarter report later on.
Part of the reason why the Fire phone is not selling as well as Amazon hoped could be due to the reason that it is an AT&T exclusive smartphone in the United States. Despite having strategic positions in their stores the device would have to compete with the likes of Samsung and Apple with their proven top-of-the-line contenders, it is a tough fight that Amazon will lose in time and time again. It shows through the pricing as well, the Fire phone was sold at $200 (RM654.50) during launch in O2 stores in United Kingdom but in the course of two months the prices dropped to 99 cents (RM3.24), and even then still no one wants to buy it anywhere. Then again Amazon did not give enough reason for its target customers to buy the phone, that is part of where Amazon failed too contributing to the high costs incurred from the unsold devices.