With an Amazon smartphone, the retailer seeks a tether to consumers

Written by New York Times | New York | Updated: Jun 17 2014, 14:45pm hrs
AmazonThe phone is the last and most crucial link in this colossal enterprise.
Hold the phone: Amazon wants to burrow even deeper into your life.

The retailer is expected to introduce a smartphone on Wednesday at an event in Seattle, a long-rumoured project that aims to close any remaining gap between the impulse to buy and the completed act.

Amazon has spent the last several years furiously investing billions of dollars on multiple fronts: constructing warehouses all over to deliver goods as fast as possible, building devices as varied as tablets and set-top boxes, and creating and licencing entertainment to stock those devices.

It all adds up to a wildly ambitious venture without precedent in modern merchandising. Wall Street has generally cheered as competitors an ever growing group that now includes businesses like Walmart, eBay, Apple and Google regard these activities with increasing unease. Customers, meanwhile, are propelling Amazon toward the rarefied ranks of companies with revenue of $100 billion.

The phone is the last and most crucial link in this colossal enterprise. It is a singular gamble for a company that, for all its technology components, is still primarily a merchant. Because even the smartest tech companies have trouble with phones.

A Google smartphone, the Nexus One, failed to catch on. Google next bought Motorola and then dumped it. BlackBerry, once the dominant smartphone maker, is struggling to survive. Microsofts Windows Phone has less than 3 per cent of the global market. A Facebook phone stumbled last year.

When it comes to smartphone profits, Apple and Samsung divide them up, leaving crumbs for every other manufacturer.

At least in the United States, phones are a mature market, with 120 million sold last year. Now Amazon is giving this brutal business a shot. On the one hand, analysts say, it has no choice. On the other, the rewards could be tremendous.

Mobile is asserting not just its utility but its supremacy, said James McQuivey, an analyst with Forrester Research.

If youre Amazon, youre worried youre going to be cut out of the next big interface. So you jump in and make yourself relevant, whether your customer is in the bathroom, the kitchen or the car. You go for broke.

For Amazon, the risk of doing nothing is that it could be completely marginalised by one of its competitors.

McQuivey offered the example of coconut flour.

Search for the flour on Google, and Amazon comes up in two of the top responses, one of them an ad it paid for. In the future as designed by Google, however, the search engine will remember what youre looking for when youre out in the world and sell ads against that. So the next time you pass Trader Joes, your Android phone sends a note: There is coconut flour just 50 feet away. If that sort of transaction starts happening too often, the coconut flour is going to go stale in Amazons warehouses.

In building a phone, Amazon has advantages other phone makers do not. It can sell to its 250 million customers without a middleman. It can bundle features with the Amazon Prime membership club, as it just did last week with a new streaming music service.

Most of all, Amazon has the blessing of Wall Street to lose money as long as it is gaining market share although recently the enthusiasm has dimmed a bit. The stock is about 20 per cent off its peak.

An early demonstration of what Amazon wants to do with shopping can be seen in the Dash, a wand that the company quietly introduced this year. Customers who belong to Amazons grocery service can use the Dash, which scans bar codes and takes voice commands, to restock their refrigerator and cabinets.

Imagine the Dash set free on the world and you have Amazons long-term hopes for a phone. Sam Hall, an Amazon mobile executive, succinctly set forth the agenda in an interview a few years ago: Were trying to remove the barrier between I want that and I have it.

An Amazon spokesman declined to comment on Wednesdays event.

David Streitfeld