Are Amazon’s devices big sellers or not?

Discussion
Dec 03, 2015

It was only a few months ago that Amazon.com began shelving and scaling back many of the consumer device projects it was working on. But given Amazon’s Black Friday sales statistics this year, one wonders if the company might not reconsider backing away from the consumer device market.

USA Today reported that Amazon’s biggest-selling items on Black Friday weekend were the e-tailer’s own devices. The Fire Tablet and the Fire TV stick were the two top sellers. The Amazon Echo, the e-tailer’s home personal assistant, was the biggest seller of all items over $100.

Amazon did not release specific sales figures for the devices, according to the USA Today article.

Amazon is not shy about jettisoning projects that do not take off. But reports that the failure of Amazon’s Fire Phone led to unprecedented layoffs in the company’s Lab126 hardware development center raised questions about how much the company should invest in the device market.

Speculation on the reasons for the failure of the Fire Phone to hit it big ranged from arriving late in an overcrowded market to availability through too few retail outlets, online or brick-and-mortar. Fire Phone’s clear attempt to pull and lock users into Amazon’s e-commerce ecosystem was another reason cited. The Fire Phone featured a physical "Buy" button on the device.

Amazon Echo

Source: amazon.com

Increased holiday sales of Amazon Echo could demonstrate that consumers are less concerned about being pushed to shop Amazon by their devices than previously thought.

Some, however, are not sold on the idea that Amazon has made a marked rebound in the device market at all. Market intelligence website Gigaom points out that Amazon’s reticence to share exact numbers makes it difficult to know if the holiday statistics mean what they appear to.

The Gigaom article cites high on-site visibility and low prices on Amazon products during Black Friday as factors driving the purchase of the devices. The Fire Tablet, for instance, not only retails for $50, it was recently sold in a six-pack.

The Gigaom article also notes that company secrecy over specific sales details can lead to misleading numbers. For instance, Amazon publicized that it had sold more than six times the number of Fire TV streaming devices this Black Friday weekend than it had during the same weekend last year, and three times as many Fire tablets in that period. But without knowing how many devices were sold in the first place, is it difficult to truly gauge the devices’ popularity using such a metric.

Will Amazon’s apparently high consumer device sales over the holidays inform a renewed investment in device development? Do you think the sales numbers are as impressive as they seem or is Amazon trying to shift the device market’s perception with a media event?

Braintrust
"Anyone can sell items at a loss. Without looking at gross margin, top-line sales numbers just don’t mean that much to me, especially coming from Amazon."
"To "echo" the USA Today article, our Profitero FastMovers data showed that the top 10 best-selling electronics items at Amazon over the Black Friday — Cyber Monday period were all Amazon devices, with the Fire Tablet, Fire TV stick and Amazon Echo holding the top three positions."
"Echo is an early-to-market device for a coming trend called "ambient computing." Competitors would have a hard time succeeding at such a low price point given the development curve for the device and the AI behind it."

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13 Comments on "Are Amazon’s devices big sellers or not?"

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Paula Rosenblum
BrainTrust

Anyone can sell items at a loss. Without looking at gross margin, top-line sales numbers just don’t mean that much to me, especially coming from Amazon.

I think Amazon was looking for mass, and they got it. And buzz. And they clearly got that. One of these days, the retail business is going to have to be profitable as well.

Keith Anderson
BrainTrust

To “echo” the USA Today article, our Profitero FastMovers data showed that the top 10 best-selling electronics items at Amazon over the Black Friday — Cyber Monday period were all Amazon devices, with the Fire Tablet, Fire TV stick and Amazon Echo holding the top three positions.

I believe Amazon will continue investing in devices with a focus on two areas:

Internet of Things and new interactive paradigms. The Dash wand and button, the Echo, and recent patent filings suggest Amazon is still investing in emerging device classes, particularly those that have a natural linkage to how households buy and consume products and media.

Basic versions of more established device classes, like tablets. The Fire Phone tried and failed to out-innovate premium phones, but Amazon has done very well with value-tier devices that make technology more broadly accessible. And in the video streaming category, which was not as mature when Amazon entered, they’ve held their own at the mid-to high-end.

Amazon is a data-driven company willing to move on from failed experiments and re-invest in high-potential innovation. Hardware will continue to play a key role in their strategy.

Ken Lonyai
BrainTrust

Echo is an early-to-market device for a coming trend called “ambient computing.” Competitors would have a hard time succeeding at such a low price point given the development curve for the device and the AI behind it. My guess is that Amazon is generating curiosity by selling it so cheaply.

So yes after hearing what they did sending a PR person to a meeting they scheduled in Robbinsville, NJ yesterday, I don’t put it past them to be using media spin to enhance their sales perceptions.

Kenneth Leung
BrainTrust

Without reporting the numbers as a consumer electronic device manufacturer with profit margins and base numbers, it is hard to tell. After all, with Christmas the price point of items they are selling is on the low end which means it could be “given to family and then sit in drawer.” Basically when the water rises it floats all boats. The investment in development and fast replacement cycle of consumer electronics is quite high and Amazon as a retailer has to be careful to focus on a few products, only given it needs to be profitable at some point.

Nikki Baird
BrainTrust

I’m not sure what to make of the Echo, but if Amazon looks at how the Fire did and thinks “Huh, maybe we should keep that around” then they’re just crazy. I mean, they were advertising it themselves as “it’s so cheap you should buy a whole bunch” (i.e., please, help us get rid of these).

Otherwise what we’re saying is, the strategy for CE should be to lose enormous amounts of money in the hopes that your device becomes so ubiquitous that people can have the “Bathroom Fire” and the “Car Fire” and the “Kitchen Fire” (which, now that I read what I’ve written, would’ve been a brilliant and hilarious campaign idea).

At any other company, this level of investment and subsequent failure would’ve put the company out of business.

Kim Garretson
Guest
Kim Garretson
1 year 8 months ago

I think the fact that the Echo has 28,000 reviews, with 65 percent of them five-star and 22 percent four-star indicates that Amazon either has a hit on its hands now or soon for future growth. With the new Apple TV adding Siri voice commands and all the other major players scrambling to add voice, I think Amazon sees a big future for voice and it core businesses. With the SDK coming soon, and likely a ton of innovation in expanding the core capabilities of the device, I am a believer in the device strategy.

Doug Garnett
BrainTrust

I certainly don’t have detailed inside knowledge. But as an observer, when it comes to Amazon devices I’m immediately drawn to the Zyman idea that in the absence of meaning consumers will always fall back on price.

Amazon has been entirely unable to give their physical products meaning beyond low price. And that really doesn’t bode well for their future. It’s a rare company who can build a valuable brand from the ashes of extreme discounting.

Todd Hale
Guest
Todd Hale
1 year 8 months ago

I can’t think of another company that is as good at incredible levels and frequency of innovation as Amazon. I’m still in the camp that getting more of their members connected via devices is still an important part of their growth strategy.

Robert Heiblim
Guest
Robert Heiblim
1 year 8 months ago

Amazon will not exit devices, they will just focus on doing it better. The issue is rarely good sales per se. Amazon is just one large entity and so even if its sales are strong in the overall market the share may be small. The issue then is inventory control. No matter how many you sell, if clearing the unsold gets ugly then the whole may be unprofitable. To a great extent we see Amazon learning this. The new small $50 tablet is a classic OPP item. It will sell well due to fine value for its price rather than a choice between top performers. It should be easy to source and control inventory. That is a winner regardless of market share. Past that, keeping dedicated Amazon Prime members in the ecosystem remains a good goal, and one that does not require Amazon to compete in the broader market, but simply to serve their own market and control inventory while doing it.

Peter Charness
BrainTrust
Isn’t it a question of brand awareness and loyalty? When I think of smartphones, there are long term well-established brands, one of which is not Amazon. If they want to be in that space they have to have the patience and marketing spend to get there, but a “Fire X” is a good strategy to start with. It may just be too late to introduce a new smartphone brand, just like it is too hard to introduce a new cola — unless it’s dirt cheap. TV Sticks — no real brand winner, maybe Chromecast a bit, but nothing that would create loyalty, so an Amazon Fire TV has as good a chance as any. Echo is net new to the market so no brand leader. The Fire tablet is a bit surprising but in some respects its predecessor “kindle” is an established leader so the tablet is a follow-on and the price made it a commodity dirt cheap to buy, not unlike a generic tablet. So I think like any other product company if they want to be a brand leader they have to establish the chops in that space, or via valid brand extension get there. Maybe some day “Fire” will… Read more »
gordon arnold
Guest

The big box retailers don’t manufacture most or in some cases all of their private label products. Their expertise is, or perhaps was, retail sales. That said, we might be seeing Amazon now owning the lessons learned about recovering the costs associated with bringing to market leading edge technologies in any product type. With a better understanding of the associated risk the make-or-buy decision may have been revisited in favor of buying and selling. Selling the latest and greatest is much easier for quality retailers than manufacturing the best there is. So why not do what you do best and grow profitably with far less risk to the company and its vendors?

Lee Peterson
BrainTrust
Amazon’s tech mentality of “fast-fail” destroys the way traditional retailers think and that lesson is certainly becoming more and more apparent to just about everyone else. Look out below. I’ve had people tell me that Amazon’s Fire phone “didn’t work.” That’s not true! Amazon now knows what it takes to sell that type of device, what they need to correct, and how to make similar launches more successful. They also know that having a customer’s business on their device is a BIG DEAL. What does Walmart or Target know about that? Why haven’t they tried selling their own devices? Drones, Echo, Dash, Prime, Delivery Trucks, Food Delivery, Uber delivery people, the Post Office … those are all brand touch points and part of a massive “fast fail” strategy. Who’s answering those bells or coming up with their own? How much longer will traditional retailers stand by and watch as consumers move online and shop at Amazon first? They did 36% of Black Friday’s online business despite severe cap ex spends on ecommerce by trad retailers. One answer may lie in the one thing Amazon doesn’t have: stores. As Sam Walton famously said, “it’s easy to compete with us — just do… Read more »
Lee Kent
BrainTrust

You all know my mantra with Amazon. “Where’s the Beef” or rather, when will Amazon become profitable? I admire that they are willing to jump into new markets and try new things but hey guys, at some point you just gotta cut your losses and move on. Giving away devices is not how to do that, IMHO.

And that’s my 2 cents.

wpDiscuz
Braintrust
"Anyone can sell items at a loss. Without looking at gross margin, top-line sales numbers just don’t mean that much to me, especially coming from Amazon."
"To "echo" the USA Today article, our Profitero FastMovers data showed that the top 10 best-selling electronics items at Amazon over the Black Friday — Cyber Monday period were all Amazon devices, with the Fire Tablet, Fire TV stick and Amazon Echo holding the top three positions."
"Echo is an early-to-market device for a coming trend called "ambient computing." Competitors would have a hard time succeeding at such a low price point given the development curve for the device and the AI behind it."

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