Some people have small hands and small pockets, and would be well-served by this device compared to larger readers. I personally wouldn't use this device, but I know some people who would get a lot out of it.

"If I wanted to read books on a phone shaped e-reader I'd just use my phone"

The phone is full of notifications, games, work reminders, and other distractions. E-readers aren't going to be peoples' default device for those purposes, so they enable greater concentration when reading. And you won't have to worry about your phone's battery life after a long reading session either.