Amazon smartphone strategy: don’t care about making a profit -just want marketshare

Discussion in 'Alternatives to iOS and iOS Devices' started by EbookReader, Sep 3, 2013.

  1. EbookReader, Sep 3, 2013
    Last edited: Sep 3, 2013

    EbookReader macrumors 65816

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    #1
    http://gigaom.com/2013/09/03/why-i-think-the-7-2-billion-microsoft-nokia-deal-is-a-terrible-idea/

    Amazon will likely duplicate Xiaomi strategy that has brought its wild success in China (20 millions smartphone to be sold in 2013) and $10 billion valuation. This for a company began selling phone less than 2 years ago.

    http://techcrunch.com/2013/08/28/xiaomi-what-americans-need-to-know/

    http://www.theverge.com/2013/8/29/4672668/what-is-xiaomi-china-smartphone-hugo-barra-android


    European market has been moving toward "no subsidy" model.

    In the USA, T-Mobile has already switched from subsidy model to a "financing model."


    http://gigaom.com/2013/03/18/european-carriers-are-moving-away-from-handset-subsidies-analysts-find/


    Amazon can use Xiaomi strategy of "no marketing budget, sell it straight from Amazon.com only (no markups from resellers/physical stores). Price it a break-even.

    A $199 break-even no contract phone made by Amazon will have pretty decent specs.


    It's just a matter of WHEN not IF when Amazon launches its first phone. kphone perhaps?
     
  2. kdarling macrumors demi-god

    kdarling

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    #2
    Not to take away from the Amazon comments, but as far as the idea that Xiaomi makes nothing on their phones...

    That was their original plan. The founders were billionaires already and were okay with breaking even on hardware, whilst making money on software. However, hardware costs kept dropping...

    That's their public sales pitch, but at the low end, their Red Rice model sells for $130, with a BOM of $85. That's a 35% gross profit margin over BOM.

    Their high end model sells for $370 with a build cost of probably $240 (my estimate), also a 35% gross profit margin over BOM.

    Fellow Chinese phone makers have come out and said that Xiaomi is actually making pretty good money. Some have estimated that adding in all the manufacturing costs, Xiaomi is making a gross profit of 20% to 30% per phone.

    Yep. Right now, a $199 break-even phone could be a nice upper mid-range device.
     
  3. blitzer09x87 macrumors 6502

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    May 19, 2013
    #3
    when you dont care about the profit, that's when the best things happen.
    you go over the limit, you bring those tech pieces which the competition had planned for the future, all you do is listen to the consumers and then bring out the "perfect product".

    great strategy by amazon, i hope to see some great tech from them.
     
  4. aristobrat macrumors G4

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    #4
    My guess is that like Google, Amazon plans to make their money/profit by pushing people to use their services. With that model, they can sell the phone as a loss leader, but ultimately, I do think they care about profit.
     
  5. EbookReader thread starter macrumors 65816

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    #5
    if you sell it at break-even, it won't be a loss leader.

    For example: Cost $180 to make. Sell it for $199 with the aim of break-even. The $19 leeway will take care of returns, warranty, customer service, warehouse etc...

    The profits will come from the services: apps, digital music, digital movie, ebooks sold.

    Selling physical CD, DVD/Blu-Ray, and physical books are a large part of Amazon business. And they know that these media are switching to digital. They don't want Google/Apple to take away Amazon customers who are used to buy media on Amazon.com

    That's the main reason why it's certain that Amazon will sell a smartphone. Their tablet strategy was based on this (selling digital movies, digital music, ebook and apps).
     
  6. EbookReader thread starter macrumors 65816

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    #6
  7. EbookReader thread starter macrumors 65816

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  8. ElectronGuru macrumors 65816

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    Oregon, USA
    #8
    Fixed that for you. Amazon's customers aren't the people who buy their products/services. They sell just about everything at cost, and take loss after loss on the shipping. All this is subsidized by their real customers - investors who care only about growth. Pay for things by selling stock and you can provide twice the service for half the price.
     
  9. Kashsystems macrumors 6502

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    #9
    People tend to forget R & D, labor costs, operation costs. It is quite possible they are breaking even at that price.
     
  10. AutoUnion39 macrumors 601

    AutoUnion39

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    #10
    I think Amazon can pull this off. They'll rely on Amazon services to make money. Not to mention, Amazon is pretty set when it comes to $$$. :D
     
  11. MRSucks macrumors member

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    #11
    (Lame) Kindle Fire smartphone (with it's meh ecosystem and endless marketing). Pass.
     
  12. MRU macrumors demi-god

    MRU

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    Ireland
    #12
    Amazon have come out and killed this rumor. No phone in 2013 and certainly if they do release a phone, they say it won't be free.....
     

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