Amazon’s New 3D Smartphone Could Disrupt These Businesses

Amazon (NASDAQ: AMZN  ) could release a 3D smartphone later this year, according to a recent report in The Wall Street Journal. The device will reportedly display stereoscopic 3D images that can be viewed without 3D glasses. The report also states that Amazon has placed an initial order of 600,000 units from one of its suppliers.

Reports about the Amazon phone have floated around since last year, but the Journal now claims that the device is scheduled to arrive in the second half of 2014, and that a prototype has already been shown to app developers.

Challenging tech titans Apple (NASDAQ: AAPL  ) and Samsung (NASDAQOTH: SSNLF  ) -- which respectively control 41% and 27% of the U.S. smartphone market -- is certainly a daunting task. Some critics might think that an Amazon Phone is a doomed effort, but I firmly believe that it could actually be a game-changer in terms of e-commerce, mobile gaming, and the overall smartphone market.

How Amazon's Phone could revolutionize mobile e-commerce
To understand the impact of a stereoscopic 3D screen, simply play a game on a Nintendo (NASDAQOTH: NTDOY  ) 3DS. Imagine if that technology, which allows gamers to see a 3D world through a holographic "virtual window," were used to display physical products in a digital showroom. Combine that with eye-tracking, rotation, and pinch-and-zoom technology, and you could virtually "hold" a projected product in the palm of your hand.

Amazon's spinning models. Source: Amazon

To see how this technology can be implemented, take a look at GSM Arena's 360-degree spinning view for smartphones and Amazon's video models, who spin around to model their outfits. If these products were shown on a virtual 3D screen, if would be a much more immersive experience than any mobile shopping experience.

If Amazon also equipped its phone with dual cameras to allow users to take stereoscopic 3D photos -- a feature found in HTC's Evo 3D, LG's Thrill 4G, and Nintendo's 3DS -- individual vendors could take 3D photos of their products to be specifically viewed on Amazon Phones.

Sales of electronics and general merchandise accounted for 69% of Amazon's North American sales last quarter, but less than 3% of U.S. shoppers across the retail industry actually make their annual purchases from mobile devices, according to a RIS/Cognizant survey from June 2013. An August 2013 survey from Nielsen revealed that 24% of U.S. smartphone shoppers purchase physical goods online, compared to 38% of tablet users.

Those two facts indicate that there's still plenty of room for growth for smartphone shopping, and that a larger screen size could encourage shoppers to finalize a purchase. Since shopping on a 3D phone would be a highly visual and immersive experience that tops a regular tablet experience, it could allow Amazon to develop a stronger foothold among mobile shoppers.

How Amazon's Phone could change mobile gaming
In the past, I've stated two things -- that Amazon's new Fire TV isn't designed to be a real contender in gaming, and that the stereoscopic 3D screen on the Nintendo's 3DS helped it obliterate Sony's (NYSE: SNE  ) PS Vita. The gap between sales of the 3DS and Vita -- 44 million units vs. 8.1 million -- is staggering proof of the popularity of gaming on stereoscopic 3D screens.

The beauty of stereoscopic 3D is that it doesn't require too much extra effort from the game developer to produce. Several Android games, including Gameloft's N.O.V.A. and Asphalt franchises, have already been converted to stereoscopic 3D for earlier 3D devices like the HTC Evo 3D.

If Amazon releases a phone connected to the same Kindle app ecosystem that the Fire and Fire TV connect to, it will have created a cohesive gaming ecosystem across home, tablet, and smartphone devices -- a first for any major manufacturer of this generation. Amazon can also use GameCircle, its Xbox Live-like framework, which can keep its smartphone, tablet, and gaming worlds fully synchronized.

By comparison, Nintendo tried to project the home console onto a semi-handheld one with the Wii U. Sony recently tried the opposite, by using the PS Vita TV to send its handheld games to the TV. Apple is rumored to be developing an iOS gaming platform for Apple TV, but nothing has been confirmed.

Why Amazon can succeed where others have failed
The one key question for Amazon is how the company can succeed where HTC, LG, and several others failed. There are two reasons I believe an Amazon 3D Phone will succeed -- its ecosystem and pricing.

HTC Evo 3D. Source: HTC

The HTC Evo 3D was doomed by three factors when it was released in 2011 -- it cost $800 unlocked, it lacked the huge ecosystem of e-books, apps, videos, and music that form Amazon's digital scaffolding, and the 3D camera and screen were deemed superfluous features. By comparison, Amazon has a history of selling cheap devices at a loss, it has a massive e-commerce and media ecosystem, and its 3D camera and screen can serve dual purposes in e-commerce and gaming.

According to Consumer Intelligence Research Partners, the average Kindle owner now spends $443 more per year than an Amazon user who does not own one. The Kindle Fire, which debuted in November 2011 for $199, became the top-selling Android tablet in the U.S. by the end of 2013. Each first generation Kindle Fire cost between $150 to $200 to manufacture.

This means that Amazon could possibly market its upcoming smartphone as a loss leader for $100 to $200, but eventually recover that lost revenue through hefty digital and physical sales.

More than meets the eye
In conclusion, I wouldn't bet against Amazon's mobile strategy. The company is clearly exploiting its most valuable asset -- its huge e-commerce ecosystem, which now includes over 20 million Prime members -- to build a consumer electronics empire that could eventually give Apple a run for the money.

Amazon's sprawling ecosystem gives it a comfortable cushion to absorb losses and release disruptive products -- like the Kindle, Kindle Fire, and Fire TV -- which in turn draw more new customers into its ecosystem.

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