This summer, eBay (Nasdaq: EBAY) acquired Half.com, a site where people sell and buy items at a fixed price that's usually at least 50% below retail. It's simple. You sell books, music, videos, and games by entering an ISBN, UPC, or product-appropriate code. A descriptive product page appears and you enter your price and product condition, and -- presto! -- your item is listed for sale. To buy items, you just click. The savings can be great, even on new books.
eBay will expand Half.com into dozens of categories -- probably any with universal product ID codes, including electronics -- and Half.com will expand internationally, too.
Now Amazon.com (Nasdaq: AMZN) is offering the same service. Amazon's service is called Amazon Marketplace. It works in the same way as Half.com, except prices are generally set about 20% below Amazon's retail price for the same product. Amazon earns a 15% commission on each sale (just like Half.com), plus $0.99. Given enough sales volume to cover back-end costs, Amazon's margins stand to be much higher on its Marketplace community sales than when Amazon sells the product itself.
To see what the new service looks like, check out the Fool's first book on Amazon. Directly beneath Tom and David's picture is a new graphic and box explaining that you can buy this book from a stranger for several bucks less (actually 40% less, as of this writing) than Amazon's price. The box also explains that you may place your copy of the book (if you own one) for sale on Amazon right now, too.
My initial reaction to this is mixed. First, it is clear that Amazon is copying Half.com. We like to see Rule Breakers innovate rather than copy, but Amazon is trying to be everything to everybody, so it is bound to copy other commerce companies' best ideas -- for better or worse -- as it did when it copied eBay's auction format, too.
What's more perplexing to me are Amazon's intentions. With its new "Sell Yours Here" offering, it seems like Amazon wants to be eBay or Half.com, not Amazon.com. Amazon is known in consumers' minds as a great place to buy new items with superb customer service. Therefore, it strikes me as odd to pull up a book on Amazon's site and see (directly beneath that book) an opportunity to instead sell that book myself or -- even much odder -- an offer to buy the book cheaper from a complete stranger.
In my mind, this undercuts Amazon's brand. I visit Amazon to use its branded and reliable service to buy a book. Now when I do so, they try to get me to buy books from strangers for lower prices instead. So, what does Amazon think of its own brand and value offering to customers?
I suddenly don't know anymore. That's the problem. I can't tell what Amazon is trying to tell me as a customer, but it sounds something like this: "Maybe you should buy this book cheaper from Stranger X because our customer service shouldn't be all that important to you, if it ever was."
Amazon wants to be a site where you can find anything that you want to buy in the world -- and apparently that means buying it from anyone in the world now, too. In the past, Amazon was about offering the best customer service and brand-centric shopping experience online. When you want to buy from different people every time, you go to eBay or Half.com. The purpose of those sites is very clear. The purpose of Amazon was very clear. Now what is the purpose?
Now it looks like a nascent interactive marketplace, where Amazon itself charges the highest prices, thereby making you doublethink whether you should pay them. (This second thought may drive some customers to other sites like Half.com where there is more sales volume!)
A final (and I think important) thought today: Customers want help in making purchasing choices. Customers (you and me) generally do not want complications added to their decision making. For many customers, Amazon is now complicating choices. Someone might be excited about a new book, so they go to Amazon and pull up its page. There it is, for sale on Amazon for $25. "All right!" they say. "I'm going to buy this book with 1-Click! Oh, wait. Some guy in Montana is selling the same book here for $15. What the...? Maybe I should buy the cheaper one instead. But, who is this guy? Can I trust him? He's not part of Amazon. Wait. Where am I shopping at right now?"
(That, Fools, was a dramatic dramatization.)
Perhaps I am overreacting to another feature on Amazon that will just be secondary and not harmful, like Amazon Auctions. However, this does indicate that Amazon is concerned about community market sites such as Half.com stealing market share. It should be concerned. The Internet is best at removing intermediaries -- at putting buyers directly in contact with sellers. Selena Maranjian wrote this summer when eBay bought Half.com, "I'm an Amazon shareholder. And I'm worried."
As Amazon tries to evolve into more of a marketplace (an, um, eBay or Half.com with a "mother retailer" attached), the question is: Can the brand handle the change? Do you think Amazon is on the right track, or is it clouding its relationship with customers? Post your thoughts. (A sidenote: How many years before Amazon sheds its warehouse business, too? We wouldn't be surprised.)
A Voting Fool and Other Foolishness
Eligible Fools, be sure to vote for president tomorrow! I've posted why I think it's important. Finally, if you missed Matt Richey's Rule Maker column last Thursday on what makes an investor Foolish, be sure to read it -- excellent and well-said thoughts!
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