Rule Breaker Portfolio

Half.com vs. Amazon.com
Is used better than new?

By Selena Maranjian (TMF Selena)
June 22, 2000

I'm an Amazon.com (Nasdaq: AMZN) shareholder. And I'm worried.

Let me back up a bit, though, and explain whence my worry originated. You see, I love books (and CDs and magazines and movies and even TV -- yes, I'll admit that). Since the advent of nifty websites such as Amazon, I've developed a little system for keeping track of books and music I'd like to one day get my hands on. (Perhaps those on our "Get Organized!" discussion board would be interested in this.) Whenever I hear of a book or album that I'd like to one day read/listen to, I jot it down. Then, when I'm at my computer, I look it up on Amazon and print out the first page of its Amazon entry. Then I file that page in a folder. Later, when I get a hankering to place an order with Amazon (or, on occasion, a competitor), I simply go through my file and choose a few items.

Over the past few years, my file has grown large. And a bunch of books I'd like are out of print. In my limited experience with ordering out-of-print books through Amazon, they're likely to come to you with the book found, but costing a bit more than you expected to pay. Last week, when thinking about buying a few out-of-print mysteries through Amazon, I remembered hearing about Half.com.

I'd always assumed that Half.com was a lot like eBay (Nasdaq: EBAY), with lots of people selling their used things and buyers having to send money to people all over the place. This time, though, I poked around a little more on the site. Lo and behold -- they had one of the two out-of-print books I wanted, for only $2.74! Intrigued, I clicked around some more and discovered that if I wanted to buy a bunch of things, I'd be placing a single order, and would only have to offer my credit card number to Half.com. They'd then send out orders for whatever I wanted to the individual people (and some businesses) that were offering them. They'd take care of paying the sellers. Hmm... Half.com was getting more interesting.

Let me now proceed to the lightning round of this story. I put that one book in my shopping cart and was informed that since I'm new to Half.com, if I chose two more items, shipping would be free. Uh-oh. An hour or so later, I'd gone through my folder of books and music, had found many of the items I wanted on sale there, and had filled my shopping cart with some 50 books and a few CDs. I was looking at about $100 in shipping and handling charges that would be waived! Of course, I was also looking at about $225 in total cost -- about $4.50 on average per item. I quickly began removing a bunch of items from the shopping cart, but still ended up placing my largest book order ever.

Here I am now, nearly a week later, and it's like Christmas. I received nine small packages from around the country yesterday. Today I received 11 more. I'll likely get another batch tomorrow. Everyone who works near me is laughing as I struggle to open all these well-taped-up packages. I'm laughing, too. Except when I think about my investment in Amazon.

After placing my order, suffused with delight at this exciting new service, I thought to myself, "I wonder if Half.com is a public company." I looked it up and discovered that eBay had just bought it!

So here we are. I'm concerned for Amazon. I've already received most of my books, and they're all in good condition -- some even in pristine condition. If I can buy Memoirs of a Geisha for $4.40 or Selling the Invisible for $4.75 or a like-new Astrud Gilberto CD for $7.48 at Half.com, remind me again why I want to pay more for them at Amazon? (On Amazon, the Geisha book is $11.20, Selling the Invisible is $13.96, and that Astrud Gilberto album is... not available, but other albums of hers sell for around $13 or $14.)

I find myself wishing that Amazon, not eBay, had bought this quickly growing company. Or wishing that I'd paid more attention to eBay before. Still, though, after not having been able to relate to eBay much before, now I'm going to take a closer look.

What do you think, fellow Fools? I invite you to pop over to the Rule Breaker Companies discussion board, to share your thoughts on the following (and any other) questions:

• To what degree does a company with a business model like that of Half.com threaten Amazon? Is anyone else worried?
  
  
• What does this purchase mean for eBay? It seems to have cornered the market on auctions, and now it has snapped up a major fixed-price consumer-to-consumer business, too.
  
  
• What does eBay bring to Half.com, besides many, many consumers? To what degree might eBay cannibalize Half.com, or vice versa? (In other words, will some people who used to seek out books on eBay now buy them via Half.com instead?)
  
  
• How might Amazon respond to this development? Should they even try?
  
  
• And what about Naomi? (That was an obscure reference to "The Electric Company." I warned you that I've watched a lot of TV.)
  

Cheers!

Related Link:

Fool Research (which covers eBay and Amazon.com)

P.S. TMF Jeff returns on Friday to continue thinking about Amazon and e-commerce.