No, the Amazon Smartphone Isn’t Going to Kill Retail

amazon-fire-phone-02_storyThere’s been a lot of hype around the much-anticipated announcement of the Amazon smartphone last week. The initial reaction has presented the Fire as another nail in the coffin for retailers by potentially increasing the prevalence of showrooming. The Amazon phone’s Firefly feature provides a user with the ability to scan a product and immediately purchase it on Amazon — no search required.

In this narrative, shoppers, armed with Firefly, will visit a store, scan the items they want to buy, order with one click on Amazon, and then leave. Through this product recognition feature, Amazon will rapidly take more business away from physical stores and accelerate their obsolescence. The retailer exists simply to provide a single, convenient location containing all of the products the customer wants to scan.

The reality is that Firefly hasn’t added anything new to the existing mobile shopper experience. By limiting the time and comparison point, Amazon has only sped up the showrooming process. A customer can comparison shop in-store today — just as they could do before.

I find it unlikely that the Fire will singularly result in a dramatic increase in showrooming activity because Firefly is a reflection of Amazon’s online shopping worldview. Online and in-store shopping are distinctly different. Online retail is geared towards the shopper browsing through a number of possible items, often opening multiple windows to compare price and features, and then potentially making a purchase decision. This entire purchase process is completed using a digital device without any physical interaction with the product.

When customers allocate time to shop in-store, they demonstrate the added value offered by physical interaction with the products and retail environment. These shoppers increasingly are using digital technology to efficiently locate items in the physical store. After finding the product, preference, touch, and other sensory experiences factor in the ultimate purchase decision. I can’t imagine someone driving around from store to store repeatedly scanning items just so they can later receive them from Amazon. It is simply inefficient to comparison shop an entire shopping list. Shoppers might use Firefly for a few big-ticket items, but that’s already happening.

I think the Fire’s adoption will be slow and limited. There were rumors that the phones would be priced dramatically lower than existing premium smartphones, which could have increased adoption and brought new smartphone customers into the market. Both the Amazon Fire and the iPhone 5s have the same price at $199 for a 2-year contract at AT&T- meaning the Amazon Fire is competing for the same affluent demographic as iPhone. A subset of Amazon Prime members will likely be the initial adopters of the Fire, and I expect these customers already do the majority of their shopping online.

Overall, it’s an interesting move for Amazon. It will be the first time any company has ever integrated the entire shopping experience from content to device to payment to shipping. It’s certainly something for retailers to monitor and potentially learn from, but it’s not doomsday. The in-store experience provides tremendous benefits to shoppers, and the Amazon Fire phone further illustrates the opportunity to use innovative mobile solutions to improve and influence the shopping experience. Retailers should continue to think deeply about how they can lead the next wave of mobile shopping innovation, rather than have the future of physical retail defined by their online competitors.

-2Mike McMurray is the VP Business Operations at Point Inside.  He has spent over 15 years leading, operating, and monetizing businesses in startups and large organizations.

  1. June 23, 2014

    Hey Mike, great point that Amazon’s Fire phone will probably be largely purchased by current Prime customers rather than reach a large number of new users.

    Ben Thompson has a good analysis of how this might be a way for Amazon to further monetize that particularly profitable customer segment:

  2. June 23, 2014

    “Amazon has only sped up the showrooming process” … I think that’s the point. Today it’s still too much work to find the right app, install it, hope it has product coverage where you are, figure out whether the store’s product model maps to non-proprietary model numbers, weigh off convenience/cost options, etc.

    Put all that behind a single button that says “The BestBuy Samsung model 123 you’re looking at is the same as Samsung model 234 which you can have delivered on Friday and save $125. Other buyers have also bought HDMI cables which we will include for free since you are a Prime customer yielding a total savings of $155.”

    Of course you don’t need a new phone to do this.

  3. gpscaddy
    June 23, 2014

    @Michael Grill – It does speed up the showrooming process, and I agree that is Amazon’s motivation here. However, I think the benefit still belongs to the retailer who is willing to match that price and let you walk out of there today with the product. They’ll make more money than Amazon on the sale by skipping the shipping costs. In fact, I just did this at a mattress store last weekend. Everyone won… except Amazon.

    1. June 23, 2014

      You could argue that Amazon won because they’ve forced a retailer with much higher operating expenses to sell a product at a price that weakens the company. The genius is that it didn’t cost Amazon anything to do that.

      1. gpscaddy
        June 23, 2014

        That is true…although I credit Walmart more than Amazon for that one. It’s a low margin buisness for sure (hence no Amazon profits).

        If inflicting pain to competitors over profitability is the name of the game, then Amazon wins this round.

        As a brick and mortar store, they’re probably just happy to get the chance to sell that second item you spoke of.

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