December 31, 2011, 12:00 AM

The Risky Rumba With Amazon

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Only so-called "professional" sellers can attain "featured seller" status, which is required before sellers can become eligible to win the Buy Box. These larger sellers pay a monthly subscription fee of $39.99, plus a percentage of sales transactions that varies by product category, and get access to tools and data feeds for loading inventory. Small sellers with less than 40 orders a month pay 99 cents per sale transaction. Product data loading services are also available through companies like Mercent and ChannelAdvisor, which charge about 2-3% of sales for their overall marketplace management services.

And while all sellers are free to provide their own fulfillment, going with Amazon's Fulfillment by Amazon service is one of the best tools for winning the Buy Box—a seller without it will almost always lose to a comparable retailer with it, Wingo and other experts say. It's another way that growing with Amazon helps to make Amazon itself more dominant in both e-commerce and e-commerce services, as it helps Amazon cover the cost of its more than 50 distribution centers worldwide. Fulfillment by Amazon fees are set per-transaction and vary by type of order; packing and shipping a one-pound book, for instance, costs a seller about 90 cents; a two-pound electronics item, about $2.25.

In addition, Mercent, ChannelAdvisor, Teikametrics and each offer tools that enable retailers to automatically change the prices on their Amazon marketplace product listings based on multiple types of data, including the seller's profit margin, how many other marketplace sellers (including Amazon itself) are offering a similar item, at what prices and in what volumes.

Davidson, the former Amazon marketplace recruiter, sells through the Amazon marketplace, using Teikametrics to figure out which products he can sell without competing against Amazon or many other sellers. "We strive not to go head to head with Amazon, but come up with new SKUs or bundles that are exclusive," he says. Teikametrics charges a set-up fee of about $500, plus a fee for its re-pricing tool starting at $200 based on a retailer's number of SKUs, according to CEO Alasdair McLean-Foreman.

Davidson has done well on the Amazon marketplace, for instance, in selling a particular SKU of the ZOKU Quick Pop Maker at $49.99, for which he has controlled the Buy Box; it also helps that he offers Fulfillment by Amazon. Davidson also operates his own e-commerce site,, that sells items ranging from wine glasses and kitchenware to "eco-friendly" wallets and iPad cases made of leather and wool.

Alternate strategies

While Fulfillment by Amazon seems to help Amazon sellers win the coveted Buy Box, some retailers say they do just fine without FBA. Ozbo, for instance, can fulfill orders and ship them less expensively through its own warehouse and under its own contracts with FedEx Corp. and the U.S. Postal Service, Wood says. Opting for FBA would require Ozbo to bake in FBA fees to its retail prices, and Ozbo's policy is to keep its product and shipping prices separate, which helps it win higher-volume orders, Wood says.

Though avoiding FBA may cost Ozbo some sales, Wood figures he still wins the Amazon Buy Box about half of the time—or for about 50,000 of the some 100,000 items Ozbo sells through Amazon.

Other strategies for winning the Buy Box include selling private-label products—a strategy used by an increasing number of Mercent's clients as a way to offer products other retailers can't, Best says.

Even retailers who have left Amazon say they may come back under the right circumstances. Carolina Rustica may consider it again for certain products like table lamps that are relatively simple to display and ship, Sexton says. And sports gear retailer evo will keep its eye on Amazon as a possible future outlet, such as for selling off-season or excess merchandise, Decker says.

Amazon Product Ads

Another option is to run Amazon Product Ads, either exclusively or in addition to marketplace listings. These are ads on that take the visitor to the advertiser's web site, allowing a retailer to follow up with the customer and denying Amazon access to sales data. Some sellers choose to sell through the marketplace only products most likely to win the Buy Box with little competition from Amazon, and sell through Product Ads items common among Amazon and other sellers, Wingo says.

The ads serve other purposess as well., for instance, sells non-wine gift boxes on (which doesn't allow for direct wine sales) and runs Amazon Product Ads for wine products. "The Product Ads are new for us, but we have high hopes for them," says CEO Rich Bergsund. "They're a win for Amazon because they let it have a category it hadn't been able to address, and we get new customers."

Bergsund says he likes being associated with Amazon, not only for the sales opportunity but because it sets a good example for retailing. "We see Amazon as a role model of innovation and being customer-centric," he says.

Indeed, Wood of Ozbo says the pressure of winning the Buy Box on Amazon has made Ozbo a better retailer. "It drives us to be more competitive, and we often have the best price on other comparative shopping engines as well as on Amazon," he says.

Wary 'til the end

Still, Wood is wary of Amazon becoming too much a part of Ozbo's sales. His partial exit strategy involves simultaneously improving, such as with more enticing product images and greater exposure on Facebook, so that he can eventually slash the share of business he does through Amazon. "My goal is to continue growing through Amazon, but have it account for only 5% of our business," he says. "So when we reach $400 million, only $20 million will be through Amazon."

A lofty goal, but with a woolly bear of a retailer partner, it might just bear fruit.

Comments | 3 Responses

  • I think Google is in a unique position to capitalize upon the discontent and natural suspicions among Amazon Marketplace vendors and should aggressively develop a well-rounded Marketplace Platform. All that an Online Marketplace needs is an agnostic, unconflicted, neutral platform for display advertising, payment processing and fulfillment. The first two, advertising and payment processing Google already does (Google Checkout). Watching UPS air their "We are Logistics" TV commercials during primetime leads me to believe that UPS views logistics and fulfillment as natural extensions of its turf and wants to be a player and could be a natural, non-competing partner to Google to complete the third component of its Marketplace platform. Google has the scale and resources to do it and should leverage and diversify out of it single pony search & adwords business model which I think will erode over time with developments like the rumored Bing/Facebook integration and ads being served thru apps and directly to devices (example Kindle special offers ebook reader) etc. EBay too can and should vie to be more than marketplace/auction listing service by adding fulfillment option as a competitive convenience for both vendors and customers.

  • There are 6, maybe 7, dominant 'doors' to commerce that are/will enable, influence or transact the majority of the transactions on the social web: Google, Amazon, Apple, Walmart, facebook, & eBay/Paypal. With geolocation and social capabilities, and the penetration of mobile & tablet, SMB retailers will increasingly have access to customer franchises that will provide compelling alternatives to Amazon's Marketplace. Currently, eBay/Paypal is a working for some who are challenged with Amazon's Marketplace. I have been impressed with the solid development of the X-commerce offer in the past 24 months, including the acquisition of Magento.

  • advertizes closed company names and then sends a chae alternative, then wont refund the return shipping Sent wrong item we returned it and they would reimburse shipping costs. We shipped and not they wont reimburse but tell us they would have sent a pre paid label if we asked someone else?They advertise a brand name blitz and sent us the wrong item . they refunded original purchase price but we are still out 30.00? they have been sent two emails and offer a pre paid label but wont offer a refund? They have received the item back we shipped them back to them.They are hiding behind email if you are willing to offer a prepay why not offer the same amount in a refund?They still advertise blitz who are closed and no longer in business, they do a bait and switch and then when you return it as they asked you are not credited for the return shipping

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