Author(s): Raghu Gopal
In 2016, Amazon introduced its "Prime Exclusive Phones" programme and began selling unlocked Android smartphones that were compatible with various wireless operators. The special ingredient in this initiative is the $50 rebate that Amazon offers customers in exchange for allowing it to run advertisements on the lock screen (see Amazon Debuts Ad-Sponsored Smartphones).
This week, Amazon added five devices to its portfolio of phones available exclusively to Prime members. They include the Motorola E4 and the Nokia 6, which it sells for $99.99 and $179.99 respectively. Amazon also added three Alcatel devices: the Idol 5s model is available for $199.99, the A50 costs $99.99, and the A30 sells for $79.99. All are 4G devices, but with the exception of the Motorola phones, the handsets are only compatible with AT&T and T-Mobile's networks, a reflection of the GSM heritage of these carriers.
These aren't flagship devices, but they offer significant value through the programme. For as little as $50, Amazon Prime users can get an LTE smartphone. The handsets allow Amazon to interact with its customers using targeted advertising, and the inclusion of several apps such as Prime Photos, Prime Music and Prime Video allows Amazon to create greater loyalty.
Smartphone sales in the US are still dominated by the major carriers, either through their stores or via indirect channels such as Best Buy and Walmart. However, there has been a growing trend of consumers buying unlocked phones, which can be activated on a choice of carriers and also enable customers to use them while travelling abroad. By switching the SIM card, subscribers can switch carriers. In the US, this is a relatively new phenomenon, but one that is getting increasing traction.
Although some of these devices are high-end phones — many sold directly by Apple — most unlocked smartphones are mid- and entry-level. We believe that in most cases they are activated on prepaid plans, generating lower monthly revenue and higher churn for providers. It's a trend that should concern the major US carriers: a growing number of consumers are learning about unlocked.
As is so often the theme these days, Amazon is shaking up a traditional market with its disruptive business model.