When Amazon.com launched in 1995, it was to operate its own online bookstore. But since opening its platform to other retailers in 1999, third-party sales have grown rapidly to represent a substantial part of Amazon’s business: 27% of all units sold on Amazon’s platform last year, Tom Beckwith, vice president of Merchant Services at Amazon Inc., told attendees at Internet Retailer 2005 Conference & Exhibition, “Unleashing the Retailing Power of the Web,” this week.
“We think Amazon’s best opportunity to grow our business is working in conjunction with our retail partners,” said Beckwith.
Beckwith, keynote speaker at the two-day event, says Amazon Services has worked to develop its e-commerce platform and related services so as to ensure the capacities available to third parties are on a par with those Amazon.com uses in its own store. Recapping Amazon’s retailer partnerships, Beckwith noted the earliest deals, when Amazon signed on to provide the e-commerce platform for ToysRUs.com, Target.com and Borders.com.
Amazon began launching its own stores within its site using the platform developed for outside sellers with the launch of its apparel store in 2002. The retailer partnerships have become such a fast-growing part of its business that Amazon separated out its services business into a wholly-owned subsidiary in 2005, Beckwith notes.
The notion of two stores with competitive overlap existing side by side on one online platform owned by one of them is just one example of how the Internet is changing some of the traditional rules of retailing, Beckwith notes. “This is not the retail we used to know,” he says. “Today customers want the perfect information on price, availability and the product itself.”
Delivering that for customers, both for Amazon and for the third party sellers its platform supports, has lead Amazon into strategic partnerships with dedicated providers of specialized online technologies. Dynamic imaging capacity from partner Scene 7 Inc., for example, powers new features such as the Shop by Room functionality on home décor site Bombay.com, which operates on Amazon’s platform and also maintains a presence in Amazon’s home store under its Merchants at Amazon program.
Stacey Gross, director of Internet operations for The Bombay Co., who joined Beckwith in the presentation, says the ability to access and integrate advanced functionality was a key driver in Bombay’s decision to relaunch on Amazon’s platform last year. “Originally, our site was built from a minimalist perspective. Bombay was just sticking its toe in the water and didn’t have a vision of where this was going to do,” Gross says.
When weighing the build or buy option in planning its most recent major site upgrade, a six-month review process, Gross says Bombay looked at hardware and software costs and other resources that would be needed from a technology and business perspective. “We started to total up the cost of what it would take to get us to where we wanted to go. When all was said and done, we got all the plusses we were looking for and none of the negatives from Amazon,” she says.
Both Gross and Beckwith addressed an audience question about whether Bombay had competitive concerns about operating a store on as part of the Merchants at Amazon program. Gross says Bombay receives “substantially more” traffic directly from the web than it does through its Merchants at Amazon presence. “We’re not intimidated by any comparison portal that’s out there,” Gross says, adding that Merchants at Amazon participation has been a good source of customer feedback. Beckwith addressed the audience question from the perspective of competitive pricing, noting parity between prices offered in partners’ own online stores and prices availing thorough Merchants at Amazon.
Beckwith notes that building success will require retailers to continue to invest in any capacities that are already strong and augment any areas of weakness through partnerships with “best of breed” providers.
“Both are attained through collaboration,” he says. “With that, we can unleash the retail power of the web.”
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