Amazon in Fire sale, other smartphone vendors feeling the heat

Amazon has taken another hit on its faltering Fire phone, by conceding a second price slash on its first smartphone offering. The online retailer has now listed the phone for $199.00 unlocked, which also includes a full year of its Prime service worth $99.

Before the drop to an almost impulse-purchase price, Fire was bumped down to $449 unlocked and $0.99 subsidised from its market entry price of $649 unlocked and $199 subsidised. In the phone’s opening 5 months, its retail value dropped by almost 70%.

The story of Fire continues to be the model example of a mispriced market entry strategy. In a market already considered to be saturated, Amazon’s traditional penetration pricing strategy, whereby it undercuts its competitors, was neglected in favour of what could be considered to be a skimming strategy, i.e. start high and gradually bring the price down. Unfortunately, such a strategy doesn’t work when the product in question isn’t in demand, so it appears as though Amazon simply got it plain wrong.

Of course, this isn’t news to Amazon, and it’s already come out saying it ‘missed’ on the initial pricing of the Fire phone. Fortune reported Amazon’s SVP of Devices, David Limp, as saying: “We didn’t get the price right. I think people come to expect a great value, and we sort of mismatched expectations. We thought we had it right. But we’re also willing to say, ‘we missed.’ And so we corrected.” This isn’t a particularly startling conclusion, as we said back in June, long before the phone came to market.

Adding to the news of its $170million write-down in Q3, the announcement of its second price slash comes as little surprise. Some might argue the Fire phone was an expensive experiment which is rapidly turning into a PR nightmare for the e-commerce giant.

But Amazon isn’t the only one having troubles. Despite continuing dominance of the smartphone market, Samsung’s smartphone sales plateaued somewhat in Q3, with marketing spend increasing solely to keep its products selling at the same rate.

The Korean vendor is alleged to be considering a shake-up of its management. According to WSJ, the man who oversaw the rise of Samsung’s mobile empire, J.K. Shin, could be shipped out of his co-CEO role. This would be in favour of adding the mobile business to the existing responsibilities of another co-CEO, B.K. Yoon, who currently heads up Samsung’s home appliance and television businesses.

Meanwhile, Sony announced plans to scale back its smartphone and TV operations in a cost-cutting exercise designed to focus more on the success of its PlayStation 4 and image sensor businesses, according to Reuters.

The Japanese tech vendor plans on reining in costs and exploiting further profitable areas of the business. In a highly competitive handset market, Sony reported 9.9 million smartphone shipments in Q3, an increase of half a million on Q2. However, the rise of Chinese smartphone vendors such as Xiaomi and Lenovo is causing a headache for a lot of the traditional incumbents and despite its growth in sales Sony’s overall market share declined by to 3.1% in the last quarter.

All of this fails to mention HTC, which has one of the most highly regarded smartphones in the HTC One M8, and yet doesn’t even figure in the top ten of all global smartphone manufacturers. In a market becoming increasingly saturated, smartphone manufacturers are feeling the heat to differentiate their product offerings, particularly those running on Android where the software offering is practically the same on all platforms.