Looking beyond Kindle: As tablet sales decline, Amazon bets on smartphones for growth

Amazon has officially announced that it will be launching a 3D smartphone on 18 June . 3D is the best guess that’s being made since a teaser video released by the company, show customers tilting their heads in different angles while looking at the new device.

While a 3D smartphone sounds cool, Amazon’s foray into the smartphone arena raises several questions given that the Kindle-maker is not seen as a big hardware manufacturer. For most users, the company is all about content.

This is also why Kindle Fire tablets run a forked version of Android (which doesn’t have access to the Google Play Store but the Amazon Appstore). For Amazon, the idea with Kindle is to bundle content with hardware and software.

So why switch to a smartphone and what are the potential gains for Amazon from such a strategy? A piece on Mashable points out two possible reasons why this phone could make sense for the company. It argues that _"_one tablet sales have flatlined: People aren’t buying them at the same clip as they used to, even though prices are at an all-time low."

IDC numbers showed in May 2014 showed that the 2014 worldwide tablet plus 2-in-1 forecast is down to 245.4 million units, lower than the previous forecast of 260.9 million units. The new forecast represents just a 12.1 percent year-over-year growth rate, much lower than the 51.8 percent year-over-year growth of 2013.

According to IDC**,** consumers keeping their tablets, especially higher-cost models from major vendors, far longer than anticipated is one of the main reasons.  The second reason is the rise of phablets_._ “The rise of phablets – smartphones with 5.5-inch and larger screens – are causing many people to second-guess tablet purchases as the larger screens on these phones are often adequate for tasks once reserved for tablets.” Tablet shipments were down to 50.4 million units, representing just 3.9 percent growth over the same period a year ago in Q1**.**

Worryingly for Amazon, the company managed to ship only 1 million Kindle Fire tablet units, and saw an overall negative 47.1 percent growth. But for Amazon, the 3D smartphone’s success won’t just depend on new technology being offered. The smartphone market is already over-crowded with devices that claim to offer ’new features'.

As the Mashable piece notes, Amazon could “offer an new kind of app or service that’s exclusive to owners… offer a custom-designed mobile shopping experience…”

It’s obvious that hardware is not what is going to make the smartphone standout, but rather what else it can give to the users that they might find daily use for.

Given that Amazon is seeing its core tablet business stagnate, the success of this smartphone will be crucial to the company’s future strategies.