Amazon.com (AMZN 2.61%) has been aggressively investing in new products so far in 2014, and many of those product categories are directly competing with Apple. Amazon has in excess of 240 million e-Commerce customers and its smartphone launch will help it to generate more sales from them. Ultimately, Amazon is trying to grab market share from Apple (AAPL 0.96%) in at least four categories including tablets, smartphones, music, and video content.
Hardware push
The recent unveiling of its Fire phone intensifies the company's push into hardware and could potentially see healthy rates of adoption with innovative features such as Firefly, a recognition technology that will identify and inform the user about more than 100 million items.
In addition to the Fire smartphone, Amazon's Jeff Bezos stated that the company already has tens of millions of Kindle Fire tablet owners. The Kindle Fire HDX is a great tablet, and competes with Apple's iPad line. Apple saw its iPad unit sales decline 16% year over year in the last quarter, and the company cited channel inventory issues.
However, IDC stated that larger-screen phones and consumers keeping their tablets for longer time periods were the major contributors for a weaker than expected quarter for tablets. According to IDC, the tablet market in the first quarter of 2014 saw a 35.7% decline from the holiday quarter, and was up only 3.9% year over year.
This deceleration was across all the major OS and screen sizes, which indicates the year ahead could be challenging for tablets. But unlike Apple, Amazon makes most of its money from content sales and e-Commerce transactions on tablets, and is much more likely to weather future declines in the tablet market.
In addition, Amazon launched Fire TV earlier in the year which competes with video streaming players like Apple TV, Roku, and Chromecast by Google.
Media content
Amazon also made huge strides in its efforts to grow media sales in 2014. Its North American media sales have lagged the company's total North American sales. In the last quarter, Amazon's North America sales grew 26% year over year, but media sales grew only 12% year over year. So that might have prompted the big investments in media content this year.
Amazon launched Prime Music, which is an ad-free music streaming service for Prime customers. Prime Music already has 1 million songs available for streaming and competes with Apple's iTunes Radio and its newly minted Beats Music service.
In addition, Amazon also added a large amount of video content on Prime Video over the last one year, and now has more than 40,000 titles, including a number of exclusive and original shows. And since iTunes is a major retailer of video content, the growth of Amazon Prime doesn't bode well for Apple. Numerous Amazon Prime customers will probably reduce their purchases of a la carte video content on iTunes because they are already available on Amazon Prime.
Disrupting Apple?
Amazon has a very high customer satisfaction rate; the company has been ranked number one in the ForeSee U.S. Retail Index for nine consecutive years. Amazon is taking on Apple and could become a worthy competitor.
The recent investments in the Fire phone and Fire TV demonstrate the company's willingness to come-out with product features that are differentiated and more consumer-friendly. Amazon could steal a lot of share from Apple on many different fronts as the competition between the two intensifies.
