“A smartphone would be a logical next step for Amazon,” ABI Research Analyst Aapo Markkanen told Wired via email. Wired asked Amazon to comment for this story, but received no response by press time.
The smartphone hardware business is a tough racket, especially because most mobile phones in the U.S. are sold at carrier stores and kiosks, and not purchased online. But it’s worth noting Amazon’s strong (and unique) advantage in hardware merchandizing: It already sells physical goods. To everyone. From shoes to cameras to camping stoves, it’s probably the world’s most trusted source in online sales, and, just as it does with the Kindle Fire, it can push an advertisement for an Amazon smartphone to everyone who hits its front page.
It’s a marketing advantage that no one can touch.
An Amazon smartphone — fully integrated with Amazon storefront features — would also fit nicely into the company’s stacked ecosystem. The Kindle Fire does a fine job of goosing digital download sales, but it’s not the device consumers carry all the time. The Fire isn’t always within arm’s reach. So imagine, instead, a truly mobile hardware device that would provide dead-simple hooks into the Amazon buying experience, 24-7.
“The lock-in effect of a great content ecosystem shouldn’t be under-estimated.” ABI Research’s Markkanen said. “If Amazon builds up a sizable customer base for its devices, and many of those customers find its content offerings appealing enough, then that would mean a tougher market environment for Apple, as well.”
According to at least one analyst, Amazon is already on its way to bringing a smartphone to market. Citigroup analyst Mark Mahaney believes that Amazon will release a Kindle Phone in the fourth quarter of 2012, according to a report from November. “Based on our supply chain check, we believe FIH [Foxconn] is now jointly developing the phone with Amazon,” wrote Mahaney in a note to investors.
Because Amazon is comfortable with thin hardware profit margins — an easy price to pay if it leads to greater ecosystem sales — it could potentially sell a smartphone at cost. Mahaney’s report says that the Amazon phone could be built for somewhere between $150 and $170, and that Amazon would sell it at cost to customers.