Amazon Firing On All Cylinders

Amazon.com appears to have become the darling of Internet Stocks at the moment, with a lofty share price and a stellar Q2 behind them. Anecdotal evidence, coming from 3P sellers who sell on both eBay and Amazon say their Amazon orders are increasing while their eBay orders are flat to down. Many sellers, are now just using eBay for cashflow until they can ween themselves off of the site. I don't anticipate they will completely withdraw from eBay but they certainly want to change their mix of sales. Because it can take up to 18 months to generate measurable sales from a sellers own website, Amazon is currently the best place to move their business. Sure it has some of the same marketplace dynamics as eBay but Amazon is a retailer that understand ecommerce. eBay is an auction site that grew so fast, so easily that they let things get out of hand and no one wants to be part of the renovation.

In media categories, many sellers are seeing Amazon sales equal to or greater than their eBay sales and with the all important 4th Quarter just around the corner, many sellers are hedging their bets. Many are expanding to Amazon now to get all of the kinks out before the all-important holiday shopping season.

Amazon's model is brilliant, if you ask me, because they have added breadth to their product offerings without having to carry any inventory; they get the best of both worlds. They can be very aggressive with their owned inventory, stocking limited breadth but tremendous depth leaving the breadth to their high margin 3P business. Because Amazon controls the marketplace (they don't call themselves a venue or a community) they have more control over merchandising as well as seller quality. When a category has too much product for the projected demand they close the category to new 3P business. This is a fluid operation that allows them to open again when the demand picks up.

Amazon's 3P business, IMO saved the company. Imagine where they would be without the margins from 3P sales that are now north of 35% of sales and growing. They have the media market sewed up. Half.com has become primarily a Textbook Sales venue that has two key selling seasons in August and January. If Half.com was a real challenge to Amazon they would be expanding to other countries.

A recent search of Amazon, pulled up Collectibles, Apparel, Sporting Goods Equipment, Cosmetics, etc. In the early days of Amazon they tried to carry this inventory and sell everything including the kitchen sink (and we all know how that turned out). Now, with 3P sellers they can make a handsome margin on product sales where they have no inventory exposure. They've found the "Holy Grail" for an online retailer. eBay can't compete because they don't actually sell anything. eBay has always had sales velocity because of auctions but that is slowing and apparently Amazon is catching up.

eBay is the "King of Auctions" and should have become the King of Ecommerce but that mantel has been passed to Amazon. eBay's bet on improving CORE may have actually marginalized them even more. eBay's like a 55 year-old former starlet who undergoes plastic surgery to recapture some of her youth.

Amazon has been around for as long as eBay but they seem to be hitting their stride now while eBay seems to have pulled a "hammy".

One caution for 3P Sellers who are looking at Amazon as the "Holy Grail", they are still a marketplace and you are advised not to "put all of your eggs in one basket". Begin the transition to your own website because it may take up to 18 months to drive significant sales through it.

You can find more information on Amazon 3P offerings at their website or visit the AmazonServices website.

Are You Considering Opening An Ebay Store? Wait! Read This First.

I never thought I would say this about eBay Stores/Shops because I love the concept and they are the only place left on eBay to feel like an independent seller but what I am seeing coming down the pike isn’t pretty. If you currently have a store and can make a reasonable profit, I would of course recommend that you stay but if you are considering opening a new store, my suggestion is to wait. Wait until eBay figures out what they want to be when they grow-up.

I am seeing a disturbing trend for eBay sellers. It is the homogenization (such a big word) of eBay. It appears eBay management wants to look and feel like a big online retailer. I believe management is concerned that buyers are beginning to migrate to sites like Amazon in increasing numbers -- this is certainly the case in the Media category – so they are pulling out all of the stops to keep that from happening.

Part of this homogenization is the new Finding Experience. In order to present the best buying experience eBay needs to control the product that is presented to the buyer -- it’s called merchandising. The popular product is at the front of the store and of course the less popular product is at the back. That appears to be the vision of the new eBay.

They can do this on Express because they don’t charge anything to be included on the site but this new approach brings up a dilemma for CORE and Stores/Shops. How do you present the best product to your buyers when you are charging sellers to be included in that search? One seller’s 35 cents is as good as another’s isn’t it. If I want to sell low price commodity products and I’m willing to pay a fee shouldn’t my product get the same exposure as a popular product if we are paying the same fee?

We must remember, eBay doesn’t sell any product. They display seller’s product to buyers and facilitate the transaction and get paid very well for that service. Amazon and Overstock do not have these limitations. They all sell their own product and only charge sellers a FVF so they are free to merchandise to their hearts content.

eBay is introducing Finding to the .com that will change the way buyers see product and the jury is still out as to what will happen to Stores/Shops. Now is not the time to be opening up an eBay Store/Shop. Sure, you can list in core because your listings only stay up for 7 days and you can be in and out of the site with no commitment but Stores/Shops require a commitment. Since eBay itself cannot figure out what to do with Stores how are new sellers going to be able to cope with all of the changes? As a seller you look at Stores/Shops as your little place on the web. You want to personalize it, brand it encourage repeat business but you are left to your own efforts to bring in buyers and with all of that effort and hard work you have the privilege of paying eBay a ton of money. Please realize your store listing fees are more like hosting then they are marketing because your exposure is limited. In order to get buyers into your store you need to spend more money in core. Then if you do actually make a sale from your store eBay takes a hefty 10% of the sale. This amount is 5% less than Amazon charges in some categories and the same as Amazon charges in others – at least in Amazon your items show up in search.

Until eBay figures out what they are going to do with Stores my best advise would be – Stay Away! Once we see what they are ultimately going to be then you can make the assessment to open a store, or not, at that time. Do not waist your money right now.

Consider this before you Make Online Selling a Career Move

If you are new to online selling or considering jumping into it headfirst, please take a few minutes to read this post. I am usually not a How-to kind of writer so forgive me if I don’t follow a standard format.

There are at least three major considerations you need to address before opening up a business online: (There are many more things to consider but these are key)

• Do you have a product someone wants to buy and can you get sufficient quantities and steady supply? If you can’t answer positively regarding this question you should stick to selling items as a hobby or for extra cash. It isn’t a bad way to go -- you won’t get rich but you won’t lose your house either.
  
• Is this a commodity product that everyone is selling already and being the lowest price is the major merchandising method? You will not last long, selling online, if you don’t have sufficient margin. Leave the low-priced, high volume game to the big guys.
  
• Before you jump into online selling understand that from 15 – 20% of your total sales will be paid out to marketplaces like eBay and Amazon, Credit Card processors like PayPal and Google Checkout (eventually) If you choose not to go the Marketplace route you will spend from 10% to 20% on AdWords. Make sure you can afford to spend that kind of money before try and make a living at selling online.

Please don’t fall prey to the “Get Rich” fast schemes or the eBay Millionaire Stories. My company was profiled over and over again as an eBay Millionaire. While I made a good living for several years I was no Millionaire.

Think – Research – Test before you start an online business.

Just my 5 Cents (Adjusted for eBay economics)

What the Heck is a TSE?

Is the TSE (Tailored Shopping Experience) the Wave of the Future!

It is evident that the Tailored Shopping Experience is here to stay. The TSE approach is what many of the big Internet Retailers are betting their future growth on. Amazon announced their own TSE - http://www.endless.com/ in January and here is a list of current eBay TSE marketplaces, according to the 3rd quarter 2006 earnings call: eBay Motors, eBay Express, Shopping.com, and Meg vaguely referred to their Classifieds portfolio as a TSE (Kijiji, MarketPlus and Gumtree, among others) One marketplace she did not mention was Half.com which has been eBay's Red-headed step-child. They can't seem to figure out what to do with Half.com, though sometime this spring they will be adding Half.com listings to Express. In January eBay announced they were buying StubHub.com to be their Tickets TSE. The StubHub deal closed this past week.

I’ve been very critical of eBay for the moves they made in 2006, so it surprises me that I see some positives in this march towards more TSE marketplaces. I have written about eBay’s vulnerability in Vertical marketplaces and this TSE approach seems to address that issue head on. Back in Oct. I wrote that I believed this new approach made the rumors of a StubHub purchase even more likely and look what happened.

If eBay can create TSE’s for Collectibles, Electronics, etc. they can re-invigorate the marketplace and keep the other TSE competition at bay. The best way to improve their relationship with sellers (if they care to) is to make a more successful marketplace. TSE marketplaces are the right move.

Wow, add this post to my article on the Stores Markdown Manager, that ran in Auctionbytes this weekend and you would think I was practically an eBay Cheerleader. Let me state for the record, my focus is on the success of online sellers not just eBay sellers. If I come across something I believe is positive for sellers, I will shout it from the rooftops. Even if that means I'm being positive about something eBay is doing.