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Article Date: 30th May 2002

What are Amazon up to?

Amazon have recently launched a new service in the UK, "Amazon Marketplace" In this article I will examine what Marketplace is and where it is leading Amazon. In the next issue Robert Lowry of Amazon.co.uk plans to answer some of the issues raised here.

What Is Marketplace?
Amazon's Marketplace is basically an opportunity for anyone who wants to sell his or her unwanted CDs and Books on the Amazon website. Listings are interwoven with those for items that Amazon already sell and you are encouraged to list in the marketplace and to undercut Amazon's prices, thus taking sales away from them.

At first this may sound like commercial suicide, however it is in fact a very shrewd step. Amazon has failed in some 6 years of online trading to turn a profit and it is the fixed costs of handling and shipping stock that are causing the problem. If Amazon can act merely as a portal, they can reduce those fixed costs, while still getting income.

It is looking increasingly likely that the only online model that will work for the big guys is to run a marketplace and live off the fees it generates. Ebay realised this a long time ago and have made a big head start in The States with Half.com..

What will Marketplace mean for you?
For individual simply wishing to unload a few CDs, Marketplace is likely to be a winner. Prices for recent CDs are generally very close to the new price, much higher than you will get selling to a record shop and comparable to what you might get selling on Ebay. That said, the fees Amazon charge are high, for each item you sell you must pay a fixed 75p + 15% of the sale price (for a CD sold at 8 your fees will add up to 1.95).

For traders there is a Pro-Merchant Subscription, offering bulk upload and the waiving of the 75 pence per item completion fee in return for a monthly upfront payment of 25

So far the response from established retailers has been muted
The reasons they have given are:

  1. Most secondhand sellers have not so far bothered to include UPC numbers in their Item descriptions, so getting ready for Amazon's marketplace involves a lot of extra work.
  2. Amazon also require data in a format that is completely different to any other site, sellers who already use GEMM, Netsounds and Ebay.co.uk generally came out cheaper however you need to bid and may miss out on an item. Half.com. is much cheaper on common titles but recent CDs sell for comparable prices to those on Amazon.

    Will Marketplace change Amazons fortunes?
    The answer is possibly. If enough small time sellers use it then Amazon may do well, there is also the chance that labels and distributors will find listing here worthwhile. If Marketplace gains wide acceptance Amazon will make a lot more money than they can from selling direct.

    I predict that Amazon will scrap Z-shops and Amazon Auctions and pool everything in order to attain the required levels of secondhand stock., this may mean lowering fees to fall in line with the more successful Z-shops.

    The big unknown is Ebay, they have so far failed to bring Half.com. to the UK, however they have introduced fixed price listings on their auction site. And seem likely to push this option by integrating Ebay Stores into their main search results.

    While some people may fear a scenario where a few major portals control most online trading the whole thing is actually panning out rather well for the small seller. It is now very easy to list your stock on half a dozen seller sites, and there are certain to be more in the future. The shifting nature of these sites is something I hope to watch closely in future issues.


    Relevant External Links
    Amazon's Intro to Marketplace
    Amazon UK Front Page

    Related pages (full index is below)
    Seller Sites reviewed Detailed tips on how to search the main seller sites
    More Record Collecting Links....

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