by Steve Weber

#111, 7 January 2008

Another Big Year at Amazon,
but Small Sellers Spin Their Wheels

Selling on Amazon

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2007 was another record-breaking year at Amazon, but rank-and-file sellers have little to cheer about. Amazon reported its "best ever" holiday sales, but many Marketplace sellers of used and collectible books reported decreased or flat sales this year. (A large minority of sellers, however, said their Amazon sales were up strongly this year.)

Amazon said its busiest ordering day was Dec. 10, with the number of items ordered up 35 percent compared to the previous year - 5.4 million items compared to about 4 million items during the busiest day in 2006.

Of course, many of those Amazon holiday sales are for toys and other new gift merchandise. But there's little doubt that growth in Amazon's third-party book sales, after years of double-digit increases, is slowing.

In 2006, growth in Amazon's Marketplace book sales stalled, as the percentage of sales resulting from Marketplace merchants failed to increase for the first time ever, according to a breakdown of the North American book market published by Foner Books, an independent publisher. According to the report, Marketplace accounted for 28 percent of Amazon's sales during 2006, the same as 2005. (To read the full report, see:

Because of Amazon's overall growth, Marketplace sales rose about 15 percent compared to 2005, the report said. But the share of Marketplace third-party sales relative to Amazon's sale of new items stalled, perhaps because of Amazon's heavy promotion of its Super Saver and Prime shipping programs.

Last year on Marketplace, Amazon began displaying listings for its own merchandise above better deals by third-party merchants -- unless sellers undercut Amazon by more than the price of standard shipping.

Perhaps the slowdown in Marketplace sales is simply due to the fact that double-digit growth was only sustainable for so long. This summer, The New York Times reported that online book sales would rise "only" 11 percent during 2007, compared with nearly 40 percent previous year.

But even if you accept the fact that online book sales have begun to plateau, why is it that sales for rank-and-file Amazon sellers seem so bad, according to anecdotal reports? Some sellers believe it's because regular sellers aren't as competitive anymore against Amazon's new merchandise or against sellers participating in Fulfillment by Amazon - in either case, buyers can qualify for free or cut-rate shipping, whether through Amazon's Super Saver Shipping program or through a subscription to Amazon Prime.

Amazon-fulfilled book listings now appear at the top of the list, above our Marketplace listings, unless we undercut Amazon by more than $3.99 - the amount the buyer pays for standard shipping. This is somewhat misleading to the buyer, implying that every purchase from Amazon qualifies for free shipping. Some sellers believe that this is not only forcing prices downward, but discouraging buyers from shopping with regular third-party merchants.

On sales of non-collectible books, we can assume that about one-third of customers don't consider our Marketplace listings, even when we've got the best deal. Some people just believe it's "safer" buying from Amazon. And there's surely another big chunk of buyers who just buy the first listing they see, regardless of the feedback or the price.

It's tough to compete with a landlord that gives themselves top billing and a sign that says "Fulfilled by Amazon." But most sellers of used books don't want to participate in FBA, either; they don't want to cede physical control of their merchandise. But there's no doubt that Amazon is committed to the program, and during 2007 construction began on one of its biggest-ever warehouse/fulfillment centers yet to help handle the FBA business.

At the same time that Amazon is hyping its free shipping, Prime shipping, and same-day service in some areas, Postal Service rate increases have pushed basic shipping fees to $3.99. And with recent increases in fuel prices, the pressure on shipping rates will probably continue. (Amazon Prime offers free two-day shipping and discounted overnight delivery for $80 a year. The new same-day delivery service, called Local Express Delivery, costs $5.99 for Prime customers.)

>>>>>Click here for page two>>>>

Questions or comments?
Contact the editor, Craig Stark

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