E-tailers Will Turn to Amazon Alternatives

Amazon’s 85 million unique visitors a month produce huge sales increases for e-tailers who participate in Amazon’s MarketPlace, but those e-tailers also suffer crippling competitive set backs at Amazon’s hands.  The fees and strategic costs of doing business with Amazon present an opportunity for another market leader to offer an un-Amazon model.

Amazon’s charges to MarketPlace participants range between 6% and 15% of sales, and for larger sellers, may also include a monthly membership fee.  Many e-tailers would be thrilled with that, if that were the only price to pay to obtain the 50% average increase in sales experienced by MarketPlace participants.  The bigger price to pay is that Amazon takes the best ideas from the MarketPlace and enters into direct competition with the e-tailers.  With Amazon charging up to 15% and controlling the placement of products on the site, many e-tailers who came to MarketPlace to grow their business instead struggle to maintain sales volume.

eBay’s shopping.com is an advertising platform that serves as an un-Amazon alternative to MarketPlace.  If ebay.com resembles a sophisticated flea market, shopping.com resembles an on-line shopping mall.   With 100 million unique visitors per month, shopping.com offers the traffic that e-tailers need to boost sales. Shopping.com offers a straight-forward cost-per-click pricing model and the advantage that the aggregator doesn’t compete with the e-tailers who offer their products via the site.  E-tailers gain additional advantage at shopping.com, because it feeds traffic into the e-tailers’ own on-line stores giving the e-tailer control over their own image.

The history of the brick and mortar department store offers parallels to Amazon’s MarketPlace.  Department stores have always had to balance between offering designer labels that attract fashion conscious shoppers with the value and margin control of equivalent products under the in-house label. Much energy has always been expended in managing this difficult relationship.  Amazon is replicating the challenges of that relationship.   Much as Levis started The Gap to go around department stores for direct access to customers in shopping malls, e-tailers will gain direct access to online shoppers via alternative aggregation model such as shopping.com.  

As the on-line shopping world flattens more and more, e-tailers will turn to Amazon less-and-less.    They will discover a wider range of options.  They will strengthen their own stores and will turn to alternatives such as shopping.com.

Information Sources: Wall Street Journal, 6/27/2012, “Competing with Amazon on Amazon” by Greg Bensinger, www.ebay.com,  www.shopping.com.