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Business / Featured — Comments Off on The big deal about 3rd party sellers
08
Jan 10

The big deal about 3rd party sellers

Not too long ago in August, Walmart followed Amazon’s decade long lead by allowing third parties to sell products on their site. Now Sears is getting in the game.

Why are third party sales so important to online retailers? A few reasons.

Increased revenues at no cost

Every time you purchase something from a third party seller on Amazon.com, Amazon gets a cut. But, unlike with everything else on the site, Amazon didn’t have to purchase the item, store the item, account for the item as inventory, or fulfill the item once it was purchased. All they do is connect buyer and seller and take a cut. It’s your classic win/win/win situation. And what a win it is:

Amazon doesn’t break out the dollar value of third-party sales, but they made up 31 percent of the overall unit sales in the third quarter of 2009, according to a regulatory filing. Amazon said more than 1.8 million seller accounts were active on its site worldwide in Q3, up 24 percent from a year ago.

Think about that for a second. Amazon is making 31 percent of its sales from third party sellers for products they never need to touch. It’s all pure profit.

Of course, Amazon didn’t pioneer this model, eBay did. But, unlike eBay, which has lost its way entirely, Amazon protected the integrity of the retail experience. Bad sellers are punished ruthlessly and sellers are kept in line. Buyers are not a problem because Amazon handles payments directly. As long as sellers can make money they will stay with Amazon no matter what the terms, but once a buyer is disappointed or taken advantage of they may disappear forever. Amazon understands the leverage and priorities implicit in this three-way relationship.

More sellers create a deeper catalog

On its own, Amazon may not be able to anticipate every potential product a consumer may want. But, if you have 1.8 million sellers like Amazon you also have 1.8 million individual sources for ideas. Third party sellers may sell any number of things from small run specialty products to niche clothing brands and anything else that would be difficult for a giant like Amazon and its army of buyers to identify.

Likewise, the more products you offer from more sellers, the more opportunities you have to provide something a customer wants. And, the more opportunities Amazon has to appear in search for these more obscure items. By encouraging third parties to sell and by protecting the buyer’s retail experience Amazon has created a retail network that is larger and more vibrant than Amazon would be on its own. Third party sellers allow online retailers to sell literally anything that can be sold.

Third party sales provide valuable data

If you’re an online retailer, you want to capture any online transaction you can. Since third party sellers allow you to sell anything, you have no reason not to try to sell everything since you’re simply using your market power to connect buyers and sellers. One thing most people fail to account for is how much data you can glean from third party sales. For example, let’s say there is a brisk business in third party sales for kitchen utensils. If you were Amazon, you might look at the stats for this product category and decide to start buying more products to build out your kitchen utensil product line so that you could take advantage of the buyer interest in the category. Without the data from these third party sales you might never have gone after this category. So, such data is extremely useful in turning up non-intuitive findings.

The problem with the Sears’ and Walmarts of the online world is that no one wants to shop at Sears or Walmart. They do so with reluctance, either because they feel don’t have the financial means or because they have no other choices. With Walmart positioning itself as the world’s low cost purveyor of low quality products and nauseating retail experiences and Sears edging toward oblivion, Amazon is in perfect shape for growth with an impeccable reputation and a powerful brand that they protect at all costs. Amazon understands what Walmart and Sears have forgotten: people want value and value doesn’t just mean having the lowest price. It means making people feel like they got their money’s worth.

Software / Internet / Technology — 7 Comments
27
Apr 09

Amazon Consolidates Position in eBooks with Stanza Purchase

I’m a big fan in general of ebooks as a concept and to a lesser degree a fan of Amazon and its Kindle ebook reader. I trust Amazon to deliver a good user experience, but I think open standards and a diverse marketplace are the best way to move forward. With that said, I follow the ebook business with interest as it such a newly vital market. We can credit Amazon and the Kindle with much of the recent vitality.

With the acquisition of Lexcycle, the producer of the iPhone ebook app Stanza, Amazon is consolidating its lead in ebooks. They are also signaling that it’s less about the device you use to read ebooks and more about distribution. Distribution is where the real profits lie. People buy a Kindle once, but they may purchase thousands of dollars worth of ebooks and e-periodicalsover their lifespan as a consumer. This is where Amazon wants to be. Not in making hardware, but in selling digital goods and controlling a large portion of the marketplace. The only reason Amazon really needed the Kindle was to create the marketplace. Once people are accustomed to buying their ebooks from Amazon, the device becomes irrelevant.

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Technology — 13 Comments
22
Aug 08

The Kindle is a portable book shelf

Since the Kindle is a new type of product whose purpose is to transform how we read, I try to observe how I use it myself.

A couple things.

First of all, I am reading a little more than normal. I’m also reading more new releases since the Kindle store recommends new books and bestsellers more than less well-known works. In the Kindle store, they prominently list both new releases and major bestsellers on the home screen. With the average new release priced at $9.99, I can take more of a risk on a new book; often the kind of books that have captured public attention, but which I would normally avoid until I finally forget all about them (The Tipping Point). I’m also reading less difficult material as many books from smaller publishers and academic presses are still largely unavailable.

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Cool Tools / Software / Internet — 2 Comments
12
Aug 08

Kindle: Let anyone safely email your Kindle

I love my Kindle. I use it nearly every day. Even though there are many books I can’t get on it, I prefer to read this way now, so I usually just move on to something I can read on the Kindle. Take note book publishers!

I’d like to use it more for other things, but the web browser is limited. One cool feature is that since every Kindle has an Internet connection and an email address you can email yourself documents that will be converted and sent to the Kindle for 10 cents (unsure on why the cost unless it’s to throttle network-crippling usage). Also, your Kindle will only receive messages sent from a sender whitelist, so you should not receive spam. Unfortunately, this means you have to add various friends and colleagues to your Kindle whitelist if you want to receive documents from them on your Kindle. If you have a lot of friends or colleagues this is a pain in the butt and will require ongoing management. There’s an easy way to liberalize access, which should still prevent spam:

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General — Comments Off on Make money for someone special as you surf
08
Aug 08

Make money for someone special as you surf

As an Amazon Prime member, I buy a fair amount of stuff on Amazon, especially Kindle books and MP3’s. With free 2 day shipping and $3.99 next day shipping, it’s too easy to buy things on impulse.

One cool program Amazon created is their affiliate program called Amazon Associates , where people can create links with their associate ID that when clicked will pay a percentage (around 6%) if the click results in a sale. The associate program is very popular among bloggers as it gives you one more way to make money off something you do anyway, like recommend books.

I see a lot of popular bloggers like VC blogger, Paul Kedrosky, who use this and it occurred to me that while I appreciate the book or product recommendations, wouldn’t it be better to award this benefit to someone in my immediate circle? In other words, shouldn’t a nice Amazon commission on MY purchases go to someone I actually know and care about? Someone who might really benefit from it rather than some Venture Capitalist out West who I’ve never met? It’s really just a matter of substituting the Amazon associate ID’s at the end of the URL. After a quick search, I found a Greasemonkey Script that does this.

Now, whenever I load any Amazon link anywhere in my browser the Greasemonkey script rewrites the link and inserts my friend’s associate ID. If I click the link and buy something my friend gets a 6-10% commission.

I would not recommend using your own associate ID as you cannot make commissions on your own purchases. Of course, if you got your friend to use your Amazon ID and you used his ID, then you might both be able to make reciprocal purchases.

It’s very easy. Here’s all you need to do:

  1. Make your friend get an Amazon Associate ID.
  2. Install and use Firefox as your web browser, if you haven’t already.
  3. Install the Greasemonkey Firefox Extension
  4. Install the Amazon URL rewriting Greasemonkey script
  5. Edit the script and add your friend’s associate ID.

That’s all there is to it. Now any time you buy anything from Amazon, your friend or loved one will get a nice percentage, which can add up over time.

In the future, it might be nice to add a feature to the script to rotate through a group of Amazon associate ID’s from friends and assign one to each link at random to make it more interesting. Or, you could see about finding Amazon associate ID’s for any charities that participate in the program.

Cool Tools / General / Software / Internet — 6 Comments
14
Jun 08

Free books for the Kindle

A while back I broke down and bought the Amazon Kindle, which I love. I have been waiting for a perfect ebook reader since I would like to get rid of any material possessions that are not necessary. Let’s face it, books are pretty useless unless you’re actively reading them. Books are an inefficient medium in that they are heavy and take up a lot of space.

One of my goals is to reduce my material possessions to the absolute minimum. Like many people I no longer own CD’s for music (having sold them several years ago), but I have also been scanning in all paper records and photos and have sold a lot of furniture and junk on Craigslist. I would eventually like to get to the point where my possessions consist of: a car, some clothing, computing tools, and a few personal effects.

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