Amazon.com Inc. (AMZN) is an Internet retailing giant and a leader in the race to control cloud computing. People look at Amazon’s great success, but forget all the products and services it created that failed despite great fanfare.
Jeff Bezos on Failure
Amazon founder and chief executive officer (CEO) Jeff Bezos treats his new projects the same way that venture capitalists manage new investments. "You need to be making big, noticeable failures," says Bezos. "The great thing is that, when you take this approach, a small number of winners pay for dozens, hundreds of failures, and so every single important thing we've done has taken a lot of risk, risk-taking, perseverance, guts, and some have worked out. Most of them have not. That has to happen at every scale level all the way down." Bezos acknowledges making billions of dollars' worth of failures while creating one of the most dominant companies of all time.
The Fire Phone, released in 2014, is Amazon's and Bezos' biggest failure to date. Bezos wanted to create a smartphone to create more loyalty from Amazon customers. The phone needed to be the most technically advanced and coolest phone to date. Bezos oversaw the project himself and lost sight of the consumer and designed the phone he wanted.
The phone debuted at a price of $199 on a two-year contract. Owning a new iPhone or a Galaxy was trendy; nobody wanted to buy a Fire phone. The company continually cut the price until it hit 99 cents. Even at 99 cents, there was no line to purchase a new Fire Phone. Amazon is not a desirable consumer brand.
Amazon took a $170 million write-off on the Fire Phone. When the supply ran out in September 2015, sales ended.
In 2000, Amazon invested $60 million in Kozmo.com. Kozmo was a service delivering small items such as DVDs, books, food, office supplies, and Starbucks coffee. It operated in major cities, such as New York, Boston, Chicago, and Los Angeles. The service was free to consumers.
Kozmo closed down in 2001. Sixteen years later, Amazon is working hard to fine-tune its rapid Prime delivery service, but it isn't free.
April 2015 saw the launch of Destinations, Amazon's foray into the travel industry. Its initial focus was weekend getaway locations in Washington, Oregon, and California. Destinations went on a permanent vacation in October 2015.
Amazon invested $175 million in LivingSocial in 2010. In 2012, Amazon wrote down the entire investment. Strangely, Amazon invested another $56 million in 2013, which it wrote down in 2014.
The company started its daily deal program, Amazon Local, in 2011. Amazon Local served as a competitor to LivingSocial and Groupon Inc. (GRPN). However, soon after the daily deals fad began dying, and Amazon Local was shuttered in 2015.
Amazon Register provided credit card processing services to small businesses through devices attached to smartphones or tablets. The service was priced below competitors PayPal Holdings Inc. (PYPL) and Square Inc. (SQ), but merchants did not take to the idea of working with Amazon. A year after its ballyhooed launch, Amazon quietly closed the service.
Fulfillment by Amazon
Fulfillment by Amazon is a good idea and one that's seen success for the company. With Fulfillment by Amazon, merchants using Amazon Marketplace send merchandise to Amazon, and Amazon ships the product when a customer orders it. While the merchant pays a fee for the service to gain legitimacy and the ability to access Amazon Prime customers, Amazon can better account for inventory and ship the product faster to happy customers.
However, Amazon often mixes up the inventory of multiple merchants selling a product together in the same fulfillment bin. A seller shipping genuine products to Amazon risks having counterfeits sent by a different merchant shipped to the customer. The seller getting credit for the sale is responsible for taking the blame, the return shipping, and refunding the purchase. Amazon Marketplace accounts for about 50% of Amazon’s sales, and counterfeit merchandise is a significant problem that Amazon has not ended. The problem will only continue to grow: there have been over 3.3 million new sellers that have joined Amazon's platform since the beginning of 2017.
Amazon iOS Kindle App
Amazon shares fault with Apple Inc. (AAPL) for the failure of the Amazon iOS Kindle app. Apple charges a 30% commission on all purchases made through apps. Amazon does not have the profit margin to pay the 30% fee. Consumers using the Kindle app on an iPhone or iPad are required to make the purchase through a computer and have it digitally delivered to the device. This puts a damper on impulse purchases.