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Why Amazon's New Phone Threatens Retailers

Built-in showrooming spells trouble for bricks-and-mortar stores

Amazon chief Jeff Bezos

Amazon today unveiled its highly anticipated smartphone—dubbed Amazon Fire Phone—that will give the e-commerce giant yet another piece of ammunition against retailers in its goal to own online shopping through showrooming and price comparisons. 

The Seattle-based company's phone includes a feature called Firefly (which appears to be a souped-up version of its mobile app) that claims to recognize more than 100 million products. Firefly employs the phone’s 13-megapixel camera to detect QR codes and Web links on packages to drive traffic to Amazon items. Amazon Fire owners will receive one gratis year of Amazon Prime with the phone, which offers free shipping on all orders.

Firefly claims to find products on Amazon within seconds, which Rich Guest, U.S. president of Tribal Worldwide, sees as a game-changer in how consumer-goods brands (many of which may have never seriously focused on e-commerce) merchandise on the shopping platform. 

"It will rapidly accelerate showrooming that retailers are already trying to combat in different ways," Guest said.

Firefly also uses audio recognition that will likely attract advertisers focused on second-screen marketing. The technology could pick up on audio clips to serve consumers related content or ads, similar to Facebook’s new Shazam-like feature.

To contest Amazon's encroachment, retailers should pack their own apps with in-store tracking technology like beacons that push consumers to shop in bricks-and-mortar stores, said Hilmi Ozguc, CEO of Swirl. "With the majority of today's retailers experimenting with beacons, they will soon be well equipped to defend against Amazon’s advances in the retail store environment," he said.

The Amazon Fire Phone also includes 3D technology that distorts photos based on how consumers tilt the phone back and forth. The device will be sold exclusively by AT&T starting July 25 for $199 with a two-year contract.

Amazon's Kindle Fire tablets run on Google’s Android operating system, but the company was careful to not plug Google into the device's actual features.

While it was not clear what type of technology Amazon will use on its phone, it’s likely a safe bet that Android will be used again. Carl Howe, vp of data sciences at Yankee Group, questioned Amazon’s ability to wipe all traces of Google from the smartphone if it's indeed built using the Mountain View, CA-based company’s technology.

"Can you imagine a phone where every single service you have is not Gmail, it’s not Google Maps, but it’s one where it’s Amazon maps and Amazon calendar?" he said. "That’s a lot of development for Amazon to get exactly right and compete with fifth and sixth-generation products."

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