What Solution Providers Can Learn From Amazon's Holiday Headache

Jeff Bezos
Jeff Bezos

Amazon, one of the largest e-commerce websites on the planet, says it expects to report a net loss of $570 million during the fourth quarter, a period that's usually a boon to online retailers.

Stockholders let their disproval show, and the hit Amazon's share price took is a sign of frustration with CEO Jeff Bezos, who's been criticized for throwing money at a multitude of markets with little to show for it. His biggest flop was the venture into the smartphone market with the much-hyped release of the Fire Phone in July.

Amazon's situation is a good illustration of advice solution providers get very frequently: know your brand. Don't try to be all things to all people. Stick to what you do best.

Amazon reported third quarter loss of $437 million, more than ten times the $41 million loss it reported in the same period the prior year. During the quarter, Amazon invested in a same-day delivery service dubbed Amazon Fresh, and spent over $900 million on the acquisition of gaming website Twitch. Amazon also spent $100 million on original programming to pull viewers toward its Amazon Prime streaming service.

"Stick to your guns and what makes sense, and not try to break into a market that isn't your own," said Douglas Grosfield, president and CEO of Xylotek Solutions, an Ontario-based solution provider.

Patrick Moorhead, president of Moor Insights & Strategy, a tech analyst firm based in Austin, Texas, was not surprised by the Fire Phone's failure.

"Amazon does really well at delivering mainstream technologies at a discount," Moorhead said. "What happened with the Fire Phone was they lost track of their core brand and who they are. It's like buying a $200 Walmart branded phone, it's just not going to happen. Amazon tried to price a device at the premium level, but their brand doesn’t stand for that. Another thing is the value add they provided was more about making Amazon money than delivering experiences consumers would gravitate toward."

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