Know About This? (re Amazon, eBay, Google) You Should!

Amazon's dominance as the e-commerce platform for "third-party sellers" may be showing some signs of decline. There is unrest among its "small merchants" about fee hikes, and now a class-action lawsuit has been filed by some merchants.

• "Third-party sellers alleged in the lawsuit that, by holding sellers' money longer than allowed (often well in excess of the 90 days), Amazon racks up interest and uses the extra cash to support its operations."

• "Amazon has skewed the relationship to best suit its own operations," noted one observer. 

• "The suit estimates the total merchandise value of third-party sales last year at Amazon averaged more than $160 million a day. By holding on to this daily cash flow for only a few days or weeks, Amazon is able to invest this money in money market funds, marketable securities and other investments, and utilize the cash as working capital in the operation of its business,' the lawsuit says."

• "Amazon has been hiking fees for its third-party sellers over the past year-and-a-half. The hikes are shrinking smaller sellers' margins to increasingly uncomfortable and untenable points. The fact that Amazon is a direct competitor to those merchants stings even more."  

This resentment of the online retail giant's actions by some of its third-part sellers seems to have emboldened Amazon's competitors. Consider these observations from some recent news articles and commentaries (again, not us):

• "eBay and Google have both offered to reduce costs and transparency for third-party sellers. The companies are naturally hoping to trigger a merchant exodus from Amazon."  

• "eBay said that it will overhaul fees for sellers on its online marketplace, lowering them for many sellers as it steps up competition with Amazon.com."

• "Google seems to be preparing for an e-commerce battle with Amazon and eBay."

• "A brewing conflict between Amazon.com and its merchants over fee hikes could benefit rival eBay, and provide an opening for Wal-Mart Stores and Google, which are just getting into the space."

• "This battle of the giants - eBay, Google, Amazon - is just getting started. Though many smaller retailers could be hurt by these three large companies squeezing their way into traditionally physical retail distribution channels."  

While some independent retailers will welcome the benefits of heightened competition for Amazon, we think it behooves all "third-party sellers" to be well aware that the true cost of doing business with any of these platforms is exposing all of your sales and customer data to your "digital landlord".
Here's what some experts warn: 

• "Knowing exactly what sells, for how much and to which customers, means Amazon can adjust its own assortment and set prices to undercut the competitors it hosts, all based on actual sales."

• "Through its third-party sellers, Amazon can also collect Customer Relationship Management data on customers who have never bought a single item from Amazon."  

Your customer database may well be the most valuable asset of your retail business. Those customer relationships represent yourcompetitive edge. Retailers must manage, protect and preserve this important asset, which increasingly has monetary value. 

Additionally, the sometimes very slow payments from Amazon to some of their merchants (exceeding 90 days) can cause cash flow havoc, especially for the "small merchants."

It always comes back to that other Golden Rule:

"Whoever has the gold, rules!"

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Reminder: all of the quotes above are from people not associated with The ROI.  We have compiled them for you strictly as an FYI.

Google and Amazon As Retailers?!?

Amazon's best-selling holiday item was its own Kindles. And now Google is selling its Nexus One smart phone online, directly to the customer (bypassing Google's previous customer, the phone carriers.)

Yep, selling to the ultimate consumer IS the definition of retailing. Increasingly, manufacturers assume that only they can "do justice" to their product line.

We all know what these companies are trying to do. They have immense confidence in the merits of their respective products, and they think retailing is easy. But it's not just the product. And retailing isn't easy.

The real test is whether these technology giants-turned-manufacturers-turned-retailers actually can be merchants? That is, can they consistently provide value to the customer?

Value: the benefits received for the burdens endured.

In our view, Google and Amazon are asking consumers to assume most of the burdens in these transactions.

• Go to the website, learn about the product, choose the item
• Ring up the transaction; send the money to us safely
• Be available to take delivery of the product
• Have questions? Use the online help forums.
• Have a return? Box it up and send it back.
• And "trust us" about receiving the credit.

Remarkable cost savings for the manufacturer. All those burdensome "retailing" issues have been shifted to the customer. Granted, maybe 10% of the market will think this is wonderful. No muss, no fuss.

Still this nagging question: Will the rest of the customers willingly endure these burdens?

Hasn't Apple proven that there's a role for storefronts "for the rest of us"?