Amazon’s Echo Chamber
I used to give Amazon’s consumer hardware strategy the benefit of the doubt. I liked the original e-ink Kindles, even though they were made out of cheap plastic. I kind of understood the first Kindle Fire tablet, even though it was a piece of junk. But as Amazon has released more and more pieces of junk over the past couple of years, I’ve lost faith. The Fire Phone, for example, is not just bad; it’s so terrible that it’s dishonest of Amazon to sell it to anyone. There are zero people on Earth who would be better off owning a Fire Phone instead of an Android phone. I’m not exaggerating–go find one to play with, and you’ll understand. The hardware is abysmal and the software is embarrassing. You would have to be delusional as a manager to launch it and tell people that it is a well-made phone. What does that say about Amazon’s consumer-side brand and strategy?
It’s extremely hard for me to understand Amazon’s consumer hardware strategy. Usually, when a company has a strategy I don’t understand, I can look deeper, ask employees, or analyze the greater market to get a faint idea of what is driving the company’s behavior. But with Amazon, I can’t. There is simply no rational explanation for its products. The only thing I can come up with is this: Amazon continues to make hardware because it doesn’t know that it sucks, and it has a fundamentally flawed understanding of media. With Amazon.com, it can heavily and successfully promote and sell its products, giving it false indicators of success.
It’s an echo chamber. They make a product, they market the product on Amazon.com, they sell the product to Amazon.com customers, they get a false sense of success, the customer puts the product in a drawer and never uses it, and then Amazon moves on to the next product. Finally, with the Fire Phone, customers have been pushing back. You can’t buy a phone and put it in a lonely drawer, never to use it again, like you would with a Fire Tablet. You can’t dupe your customers by selling them a shitty phone, because a phone becomes a part of its user’s identity.
The media strategy that seems to be driving Jeff Bezos to make mobile consumption devices (with Amazon’s media stores and Prime video/music) is flawed. No one makes money selling media for consumption anymore. That market is quickly and brutally dying. The media market is now so efficient that all profit is completely sucked out of the equation by the time you get to the consumption delivery system, to the point that it is barely possible to break even. You can only make money with media by selling the device itself at a huge profit (Apple) or by providing a greater media experience (a movie theater or a nice set of speakers). A cheap, shitty tablet or phone does not fit into that equation anywhere.
Even if Amazon’s goal is to sell tablets and phones so people buy more retail stuff from Amazon, I don’t see how that can work in any reasonable future. That strategy would only work at tremendous scale, when you have millions of people using Amazon devices to buy Amazon retail stuff. The investment Amazon has made in its hardware strategy totals millions upon millions of dollars. Without any retail profit in the first place, how would they intend to recoup that investment? First, you’d have to make something people want. And given Amazon’s past performance, I wouldn’t hold my breath waiting for that.
Amazon’s retail strategy of being allergic to profit does not translate well into hardware manufacturing. People buy hardware that fits into their lives, and becomes part of how they identify themselves to the world. If you want to sell hardware, you have to be in fashion, like Samsung was two years ago, or like Apple has always been. Amazon is incapable of understanding fashion, because it has no taste, and its hardware is completely unfashionable and tasteless.
Amazon is slowly destroying itself from the inside out, through its own echo chamber, by focusing on a strategy that will never work and does not even make sense.