Amazon unveils its smartphone. But who will buy it?

Forget point-and-shoot. This is point-and-shop.

Amazon.com announced that it's officially getting into the smartphone market Wednesdayreleasing the Fire Phone -- a clear play to get more users for its $99 per year Amazon Prime membership. The 4.7-inch phone, which starts at $199.99 and comes with a free year of the premium shopping service, makes it easier than ever for people to shop via Amazon. The phone, which will be offered exclusively through AT&T, has a button on the side that will immediately recognize products that users scan, listen to or watch, and then send them directly to Amazon.com to buy it.

“Fire Phone puts everything you love about Amazon in the palm of your hand," Amazon chief executive Jeffrey P. Bezos said in a company press release.

But there's one big problem for Amazon: It's not a great time to get into the smartphone market right now, particularly in the United States where the interest in new smartphones is flat. 

Nearly everyone who might want a smartphone in this country probably has one, and once customers get into a certain smartphone maker's orbit, they tend to stay there. There's a reason that Apple and Samsung command nearly 50 percent of the world's smartphone market between them -- and nearly all of the profits -- leaving all other companies to pick at the scraps.

"It's a nasty business," said Carl Howe, an analyst for the Yankee Group. "At best they'll break even, and you need a lot of sales of other stuff at single-digit margins."

So will this be worth it for Amazon?

If there's one thing that Amazon isn't short on, it's ambition. Amazon's main innovations in the consumer electronics space have been focused on bundling things together to provide a one-stop shop -- the "Store for Everything" model. Having a smartphone in the mix opens up new worlds of potential for the company to expand its empire.

With its Prime service, Amazon's proven that the bundle is a model worth chasing. A note from RBC Capital Markets analyst Mark Mahaney ahead of the announcement noted that Prime consumers spend twice as much as non-Prime customers on Amazon; even owning a Kindle means that you're likely to spend 30 percent more than the average customer.

A smartphone gives Amazon perhaps the most direct path to the consumer yet, given that people spend an estimated 22 hours of each day within reach of their smartphone. The tech giant has already laid track in the mobile payments space, announcing earlier this month that it was partnering with sites and stores around the Web to let online shoppers pay for things using the credit card information already store on Amazon.

It also gives the company a way to break out even further from the online shopping world into the land of brick-and-mortar stores -- putting it on the cusp of what many say is the next major hurdle for retailers.

"Strategically, if you look at the cellphone, it can be the first real personal shopping assistant attuned and tailored to you," said Thom Blischok, chief retail strategist for the consultancy firm Strategy&.

Down the line, Blischok believes that mobile devices will become the primary portal for personal shopping. And, he said, Amazon is the unique position to provide particularly good recommendations.  "I would expect Amazon would have a strong ability to tie past preferences with current trends" to provide good suggestions, he said.

It will also let users recognize images and words, so that users can, for example, call a business by simply scanning the phone number they see on a sign. It sports a 13 megapixel camera, a speedy processor and sensors that are able to track where users' heads and eyes are at all times. That means that the phone's display changes based on your viewing angle.

These are some new ideas, but perhaps not enough to convince users to switch to the Fire, said Gartner analyst Tuong Nguyen.

"I'm a little skeptical that what they're bringing to the table is enough to make people put down their current phone and change to a new device," he said.

Nguyen said that this does make it seem like the company's upping its game on making good gadgets. But it's not a main focus of the company in the way that it is for Samsung or, certainly, Apple. Amazon's hardware, historically, just hasn't been very good at launch -- something that Bezos addressed in his speech. Because the company has its roots as an online bookstore and retailer, it's more focused on the perfect consumer experience than the slickest looking product.

The entrance into a new market also raises questions, analysts said, about whether the company is getting any closer to making money. Wall Street and Amazon investors have given the company a lot of leeway on not delivering profits in the past, but many are growing frustrated with its razor-thin margins. Adding yet another business, particularly one as difficult as telecommunications, doesn't improve the picture.

"Do we really believe they can be all things in all businesses? I don't sense there's a clear vision of what they want to be when they grow up," Howe said.

(Disclosure: Amazon chief executive Jeffrey P. Bezos owns The Washington Post.)

Hayley Tsukayama covers consumer technology for The Washington Post.
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