The Fire Phone proves Amazon can, but fails to prove it should.As expected, Amazon took the wraps today off its latest gadget the awkwardly named Fire Phone. But worse than its clunky moniker is what the company's foray into smartphones represents: An ever-increasing need to be involved in absolutely everything, at war with absolutely everyone in technology. CEO Jeff Bezos is inarguably one of the greatest business minds of the past two decades, so criticizing Amazon is almost automatically fraught. But like his Seattle friends at Microsoft, Bezos appears obsessed with building devices. And that obsession not only has little to do with making Amazon successful over the long term, it threatens to take Bezos' eye off the ball as the wolves begin to circle.
There's been a great deal of talk this week about 'disruption' in technology, thanks to a scathing piece at The New Yorker by Jill Lepore, which called into question whether companies are really being disrupted by newcomers after all. But one needs hardly to look past Amazon to see that Lepore protests too much. The carcasses of still-empty Borders stores, the unlamented Crown Books and the continued struggles of Barnes and Noble are ready reminders that Amazon came along and changed book selling back in the 1990s - forever.
It's success, of course, didn't end there. Expanding into consumer electronics allowed Amazon to help bury Circuit City. It's move into home and bath was bad news for Linens 'N' Things. But one of Amazon's most important moves was disrupting itself. The company that once claimed it was 'Earth's biggest bookstore' decided it was time for customers to buy books electronically instead of on paper. It convinced people to buy its Kindle devices, asking $399 for the privilege at first. In return it took away much of what its most avid readers loved about books: The collecting of them, the feel of the pages, the ability to share them with friends.
Clayton Christensen, the father of the now-under-attack disruption theory, would be proud. Amazon made something that was both worse and yet also much better. The Kindle's light weight made carrying two books easier. It made carrying 10 books possible. Amazon's aggressive pricing - often selling books at a loss - made books cheaper. Later, the company's farsighted decision to offer apps allowing you to read your Kindle content on competing platforms including Apple's iOS, Windows, Android meant you could always buy from Amazon no matter what device you owned.
Which brings us back to the Fire Phone. Of course, owning it isn't required to purchase goods or services from Amazon. Quite the contrary. One of its signature features, called Firefly, which allows you to take a picture of an item and then easily purchase it on Amazon.com is even already available on the company's iOS app.
Nor is the phone disruptive in any particular way. It's $199 with a contract and a carrier exclusive on AT&T right now. It has some nifty 3-D features but realistically has little chance to impact the market in an important way. For evidence, look to Amazon's Kindle Fire tablets. Unlike the Fire Phone, those don't require 2-year contracts and are significantly cheaper in many cases than Apple's market-leading iPads. Yet their impact has been minimal. Amazon sold fewer than 6 million of them in the holiday season last year and actually lost market share, according to Business Insider. (By way of comparison, Apple sold 26 million iPads in the same period.)
Supporters of Amazon's continued tablet push will note that those Kindles lead to consumption of Amazon's movie, music and TV offerings. But these are low-margin businesses and together represented under $600 million in revenues last year - not even 1% of the e-tailer's overall topline. Further, not all those sales occurred on Kindles. As with e-books, its possible to purchase Amazon's video content elsewhere: on game consoles, smart TVs, et al.
But you can bet those small content sales, not to mention Amazon's unlimited Prime video service, are an annoyance to rivals. Amazon and Apple are especially vicious foes in e-books and tablets. Netflix doubtless finds the Prime video service a perennial annoyance. Amazon has a knockoff of iTunes to sell individual songs that competes with a similar offering from Google and a new music streaming service that is a sort of poor man's Pandora.
If the company relied on all this for its future, a case could be made that Amazon is simply fighting the wars it needs to. But Amazon's future isn't about scraping together digital nickels selling songs nor being Netflix's puny rival in all-you-can-eat video. It's about eating up an ever increasing chunk of the world's retail spending by getting more goods to more people more quickly.
To than end, the company has spent billions on distribution centers pushed ever closer to where people live. It has begun offering same-day delivery and groceries in some markets. It even cut a deal with the U.S. Postal Service to get packages to you on Sundays. In a bit of razzle dazzle, Bezos went on 60 Minutes to talk about delivering goods by drone. I remain skeptical that will work in urban areas ever or for many people anytime soon, but the message it sends is critical: You want something, we want to get it to you quickly.
Here, Amazon has seemingly built an unassailable 'moat' of technology, infrastructure, and customer loyalty. Except that it hasn't. Quietly, Amazon is being disrupted right now by startups like Instacart, which just raised $44 million, and by giants like Google, through its Shopping Express offering. Google has cleverly threaded a technology layer through other people's infrastructure to do for millions what Amazon has spent billions on.
And it's fiendishly brilliant. Order something from Costco on the Shopping Express app and it gets routed to a 'picker' inside the store who gathers your order and that of others efficiently thanks to an app of her own. Then those items are checked out, automatically billed to your credit card and bagged up for you. Soon after, a driver in a Toyota Prius picks up the orders and is routed around the neighborhood to drop them off. Currently, Google is charging nothing for this, eventually it expects to add $5 per store, per delivery. Even at that price, it's an easy trade if you're going to spend a gallon of gas and half an hour to do it yourself.
Importantly, Google is allowing people to order familiar products from familiar places and - in many cases - purchase items that they might have been buying from Amazon. While it will take time for Shopping Express to have a national footprint, it's already demonstrating the ways in which Amazon's moat can be crossed. Disruption theory looks at those distribution centers of Amazon's and sees them as an albatross the company can't possibly leave behind. Google and Instacart can fly fast and free on the backs of some nimble workers and 'sail across' on an armada of Toyotas and Nissan vans.
Bezos surely is aware of this, but in the meantime he's busy making a phone. And while he's surely capable of multitasking, history tells us that even the best managers have only so much time in the day or week to focus on what matters. Apple famously talks of saying 'no' to projects as one of its strengths. Google tries to solve the chaos problem by segmenting out its future initiatives into what it calls Google X (under the direction of Sergey Brin; CEO Larry Page runs the day-to-day) while ruthlessly cutting initiatives every few years that fail to deliver.
Maybe Amazon can fight Apple, Google, Netflix, Microsoft, Rackspace, Instacart, eBay, Pandora and Samsung all at once, while simultaneously battling publishers like Hachette over e-book pricing. But Bezos can't be great at doing all of this simultaneously. And make no mistake, he's involved in everything important at Amazon.
Post By http://www.forbes.com/sites/markrogowsky/2014/06/18/enough-already-fire-phone-and-amazons-foolish-quest-to-make-the-everything-store-into-the-everything-company/
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