November 1, 2011, 3:52 PM

Low prices move Ozbo.com up on Amazon

The web-only mass merchant says it plans to expand to other marketplaces soon.

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In business only three years, web-only general merchandise retailer Ozbo.com has grown annual revenue to more than $13 million, thanks in large part to its sales on Amazon.com Inc.’s marketplace, says vice president of operations Joshua Wood.

Ozbo offers around 100,000 SKUs on Amazon.com and the retailer currently brings in about half of its total sales from Amazon, Wood says. Ozbo.com is No. 501 in Internet Retailer’s Second 500 Guide.

Ozbo.com's success with the marketplace is not alone, as sellers on Amazon registered an average of 37% sales growth in the third quarter, according to Mercent Corp., which helps online retailers sell on online marketplaces like Amazon.

Wood says offering low prices is crucial on Amazon. “The only way you’re getting a sale is by having the best overall price, otherwise you’re not getting anything. We know that realistically if we have the same price as Amazon, shoppers are not going to buy from us, no way, you’ve never heard of us.”

In order to offer prices lower than its competitors, Ozbo takes great care in optimizing its buying process. The retailer buys in bulk commodity items like pet supplies and groceries, for which it has good relationships with suppliers and can secure low prices, Wood says.

Take, for example, a product like the Gamma seal lid, a plastic lid that creates an airtight seal when screwed onto a gallon-sized bucket. Shoppers often use it to store pet food. The product is pretty obscure, but sells great for Ozbo, because its strong relationship with a nearby supplier allows it to undercut its competition and price the lid around $6.74. Most other sellers on Amazon list their prices at $9.00 or above. So the retailer makes sure it has enough in stock at all times.

“We sell an insane amount of Gamma seal lids,” Wood says. “Retail, they are about $12 apiece and you’d be surprised by the number of people that need a bucket lid. So we will look at our distributor’s inventory and once they get down to around 1000 of these, we will just bring them all in.”

The retailer also aims to use Amazon’s marketplace to secure new customers that its hopes will shop directly with Ozbo after finding it on Amazon. That way, it doesn’t have to give up a cut of its sales. “If you sell on Amazon, they are essentially taking 20% when you look at shipping costs,” Wood says. “It’s quite a lot of money, but that’s the cost to acquire the customer and we’ll pay it.”

Amazon does not permit its marketplace retailers to market directly to Amazon’s customers, but when shoppers check out on Amazon for an Ozbo product, they will see Ozbo.com listed as the retailer that will be supplying their purchases. Ozbo.com receives a mailing address from Amazon for marketplace orders, then ships the items. Wood is able to match the addresses of new orders on Ozbo.com against those from Amazon and estimates about 10% to 15% of its customers that purchase on Ozbo.com have previously bought Ozbo products on Amazon.

Based on its success on Amazon, Ozbo plans to list its products other marketplaces, including Buy.com, Newegg.com, Sears.com and PriceFalls.com in the coming months.

Amazon is No. 1 in Internet Retailer’s Top 500 Guide. Sears Holdings Corp. is No. 7, Newegg Inc. is No. 12 and Buy.com Inc. is No. 32.

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