Amazon (NASDAQ:AMZN) has had tough luck with its Fire Phone receiving not-so-good a response from the market. The phone was doing very badly and now AT&T (NYSE:T) is trying to flush out its inventory which they had very excitedly taken up. However, what more could the carrier do when the phone is already on a discounted price of a $1 contract is interesting to find out.
AT&T (NYSE:T) announced its new promotion which is set to hit the markets for the duration of October 24 to November 20. This will give customers time to purchase a Kindle Fire HDX (7 inches) for $50 with the purchase of a Fire Phone. This promotion will in turn give customers a heavy $130 discount. On the other hand, purchasing the Kindle Fire HDX will give the customer an extra cost of $100 incorporated in the 2-year contract.
The service charges in these 2 years are immense compared to the minute $80 discount. Consumer Intelligence Research Partners (CIRP) stated in their press release this month that they expect the adoption of Fire Phone to be 0%. However, only 500 consumers were surveyed hence giving off the image of a low consumer sample size to compare it to tens of millions of Amazon (NASDAQ:AMZN) customers throughout the U.S.
It is possible that the Fire Phone adoption may be extremely low but it’s definitely more than 0% as stated by the survey. Amazon (NASDAQ:AMZN) reported a $170 million inventory cost due to the Fire Phone in its last quarter which might include storage as well as actual product cost. Now it still has $83 million left in its inventory and the retailer isn’t one to disclose its unit sales. This shows a poor position of inventory management in the company as these models should have gone on sale months before.
With so many phone inventories on hand, the company will have to make amends in many promotions in order to make sure its financials don’t get affected due to this. AT&T (NYSE:T) is carrying out with this promotion mostly because it’s trying to release tied up inventory but also due to the reason that they want to make the process easier by combining upgrade fees as well as others. Not only is this a 2 year contract for the Fire Phone only but also for the Kindle Fire HDX (7 inches).
For years, carriers have tried many ways to get customers to buy one product with the help of another along with offering discount. They have tried to subsidize tablets by their service contracts but customers are smart enough to see what’s happening. They don’t really accept tablet subsidiaries considering they go weak when compared to the subsidiaries given out in smartphone contracts. Therefore carriers don’t really subsidize tablets now anymore as they and only include data plans. Smartphones however like to go for text plans and pricey voice plans to cover costs which customers can’t live without.