Some people think Amazon is a book reseller, others think the company sells tangible products. Those people are exactly right – and totally wrong.
Amazon is in the content delivery business. Sometimes that content is words on a page, other times it may be a disc of your favorite sci-fi series, or some other physical item. The future, however, is digitally delivered content: books, magazines, music, TV, movies, games, apps, and who knows what else.
Switching to digital makes things easier all around: there are no warehouses to stock inventory, no need for people to staff those warehouses, no utilities to power those warehouses, no trucks to accept deliveries or shippers to pick them up and send them back out to customers. In short, all the overhead that makes ordering stuff and waiting to have it delivered so inconvenient is resolved by going digital.
Of course there are other types of overhead to consider when going digital, but the expenses of the physical world versus the digital world lean significantly to favoring digital.
App Stores are today’s shopping malls
Amazon knows this and is making the push to get everything digitized. But it’s not content with simply being your go-to source for digital content. Almost everything sold online these days has to go through some sort of middleman. Whether that’s a credit card processor, or app store clearing house, the expenses of this extra tier adds up. For example, the last time I checked, to make a dollar on every purchase of one of my apps, I had to charge US$1.43. That’s almost 1/3 the cost of the app going directly to Google! Before you get upset and call that outrageous, keep in mind that it’s simply the digital equivalent of renting space at the mall.
Therein lies the problem: most of the time we go shopping at the mall that’s closest to where we live. In this case Apple users buy from iTunes, Android users by from the Play Store, and Windows Phone users buy from the Marketplace. There are apps which consume Amazon’s goods and services available for most of the platforms, but due to restrictions, most don’t allow you to actually buy anything through those apps — well, unless Amazon wanted to give a very large chunk of the sale to its competition.
Tablets vs. phones
Amazon has made a very good shopping mall for your desktop or laptop computer, but not for your tablet or phone because of the stranglehold the others employ. To avoid that, Amazon has its own brand of tablets which, although powered by Android, completely circumvents Google’s control and lets customers buy directly from Amazon. The catch? It’s a very locked down version of Android and you don’t get the Play Store or other Google Play services out of the box.
I have a tablet and a smartphone which I use for very different things. My tablet is my entertainment devices. I read books on it. I play games on it. I watch movies and TV on it. I only have it with me for a few hours a day. The majority of my time is spent with my smartphone. In addition to all the work I do on it, I also do all those other things that I do with my tablet. As a result, I tend to use whatever “mall” I have on my smartphone on my tablet — a pattern that everyone I’ve asked has followed as well. That pattern is particularly damaging to Amazon’s ability to compete.
The solution? Amazon needs to make a phone.
An Amazon smartphone
Amazon has its root in these United States. To take its business to the next level and begin to become the one-stop-shop for customers wanting digital goods and services, Amazon needs to get into the smartphone business. People use their phones much more than they do their tablets. Without an offering in that slot, Amazon simply won’t win. Sure, we’ll still buy a good deal of our tangible products through Amazon.com, but the future is digital, and Amazon is ready to take over that space — given the right conditions.
In Europe or Asia where people generally buy phones and plans separately, Amazon may be able to offer a compelling device. In the States the carriers still reign supreme. Customers still typically buy their phone from their carrier and pay for it over the term of their contract. As such, the only way to succeed today is to woo the carriers.
Carriers need to not only stock Amazon’s phones (and tablets), they also need to promote them. Sales people must ask if you have an Amazon Prime account first, then instantly shift you over to the Amazon section, telling you that you get tons of free music, movies, and TV shows with your Prime membership, and they’re all available right here on this phone or this tablet. If that were the case, customers would be much more likely to give an Amazon smartphone a try.
Time, however, is not on Amazon’s side. As more time passes, people will buy more content through their current “mall”, building up their own library of media – media that will only work on a particular OEM’s line of devices. There will become a point where those purchases are too great an anchor, and almost nothing will be able to coax a customer to switch.
The time is now, and the strategy is carrier adoption. Amazon needs to fish or cut bait.