Amazon’s New Tributary--Online Mall--Opens Today
Amazon.com, the biggest retailer on the Internet, said Wednesday that it’s aiming to get even bigger by opening an online mall today to sell merchandise ranging from auto parts to buffalo steaks.
But the company’s plan to let thousands of other merchants hang shingles on its site risks tarnishing the electronic-commerce giant’s hard-won reputation for sterling customer service.
“Amazon is so committed to great customer experiences, and they won’t be able to ensure a great customer experience by hooking up with every Tom, Dick and Harry who wants to sell something,” said Peter Krasilovsky, program director with Kelsey Group, a Princeton, N.J.-based market research firm that specializes in online commerce.
Investors apparently believe that the rewards outweigh the risks and sent Amazon.com’s stock surging 23%, or $14.88, to close at $80.75 in Nasdaq trading.
Analysts are optimistic about the prospects for Amazon.com’s mall despite the lackluster performance of Internet malls operated by America Online, Microsoft, Yahoo and a host of Internet start-ups.
One reason is that Amazon.com will deploy an advanced search engine to help shoppers find specific items, even if they are buried deep within the mall or are on another site. Amazon.com acquired the search technology last year when it bought Junglee.
The other Amazon.com advantage is a one-step system that allows merchants of the “zShops” to accept credit card payments. The faster payment will allow sellers to ship products immediately instead of waiting several days for a check to arrive in the mail, analysts said. The system will also allow shoppers to put items sold by zShop merchants in the same shopping cart they use to buy books, music, videos, electronics and toys from the main Amazon.com site.
Thousands of the zShops--run by small businesses, major manufacturers, specialty retailers and individuals--are scheduled to go online today at Amazon.com.
The Seattle firm is offering digital storefronts to merchants willing to pay to reach its 12 million customers. Merchants can pay $9.99 a month to list up to 3,000 items, or they can list items individually for 10 cents each. Sellers will also have to pay transaction fees ranging from 1.25% to 9.75%, depending on the product’s price and customer’s payment method.
Sellers can offer almost any product except firearms, living creatures, pornography and illegal items or substances. Amazon will not pre-screen the merchants, but customers will be able to rate them based on their customer service.
“Their very success on the Internet depends on their digital reputation,” said Jaleh Bisharat, Amazon.com’s vice president of marketing. Merchants will be removed only “if there is a case of fraud or a serious breach of policy,” she said.
That system works for online auctioneer EBay, and it will probably work for Amazon.com as well, said John Segrich, an e-commerce and content analyst with CIBC World Markets in New York.
To reduce the risk to shoppers, Amazon.com will offer refunds of up to $1,000 to shoppers who are unsatisfied with their merchandise and can’t get their money back from zShop sellers, Bisharat said.
Even with the guarantee, the company is counting on customers to make a distinction between the shopping areas run by Amazon.com and those operated by zShop merchants, online auctioneers based on the site and other partners.
But that won’t necessarily be easy.
“Consumers will know on a logical level that it’s not Amazon,” said Blaine Mathieu, an e-commerce analyst with Dataquest in San Jose. “But on another level, consumers want some type of relationship and solution that they can trust, and if they don’t get that from Amazon, they will go somewhere else for it.”
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New Hot Streak?
Amazon.com’s shares surged Wednesday to their highest level since April, when the stock peaked at $110.63. Monthly closes and latest:
Wednesday: $80.75, +$14.88
Source: Bloomberg News
