Thursday, January 31, 2008

Takeaways For Sellers, From the Amazon Q4 Earning Call

Amazon, in my book, has things dialed in. Sure the share price took a dive after hours yesterday but it recovered this morning and is now off less than 1% from yesterday's close. I'm not really going to comment about the share price, instead I want to look at how Amazon views 3P Sellers, based on quotes from their Earnings call. The entire transcript is available from SeekingAlpha.com

I loved this quote in regards to Amazon's 3P sellers: "We have our sellers, which we view as partners and customers and we’re trying to improve that experience"

I've often mentioned that eBay needs to look at their sellers this way. Over the last several years, the relationship between management and the seller community has soured.

In response to a question from Bob Peck of Bear Stearns, regarding possible reductions in take rate to retain and grow their 3P business, Amazon's CFO Thomas J. Szkutak had this to say: (the bold is mine)

"I would just say that this is such an intensely competitive environment and it has been from the very beginning, and we have lots of competitors. So it’s -- for us, the way we think about our seller business, the business you are asking about, is we think of our sellers as a customer set. We try to figure out what they want and we try to figure out how to give it to them.

We know that the number one thing that sellers want is sales. We also know that these -- the market that we operate in, and we are very grateful for this fact, is a very, very large one and in our view, and we’ve always said this, and I don’t think it’s going to change, is that there’s room for lots of winners.

We have a strategy that we are very, very focused on. We’re not changing it. We like our strategy and we are just going to stay heads down. One of the great examples I can give you for trying to drive sales for sellers is the combination of fulfillment by Amazon and Amazon Prime.

I talked about this just a couple of minutes ago but it’s a very good combination for sellers and as sellers continue to sign up for fulfillment by Amazon and as our buyer customers continue to sign up for Amazon Prime, that combination is going to be very good for our buyer customers and it’s going to be very good for our seller customers as well, and we love that. "

Let's take a look at this quote:
  • First off, Amazon considers their 3P Sellers to be customers and it isn't just lip service. eBay on the other hand rarely, if ever, speaks of Sellers as customers and the perception from eBay sellers is that they are more of an annoyance than anything else.
  • Amazon understands Sellers "We know that the number one thing that sellers want is sales" eBay thinks it is about fees. Sellers want value for their fees. They get that value at Amazon and not at eBay. When sellers are not getting the sales, they will bitch about the fees. Increase their sales and they will stop complaining about fees. It is that simple.
  • Amazon trys to drive sales for sellers and creates program like FBA to give sellers access to their Amazon Prime customers. I know this from personal experience because I use FBA and I now have access to a completely different customer set.

I'm excited about the direction Amazon is taking and I look forward to the years ahead as they expand their offerings for Sellers.

The question, observers of Amazon and eBay need to ask: Why are sellers willing to put up with a more restrictive marketplace and pay a higher FVF to sell their items? The answer "Sales" and the fact they only have to pay Amazon after they have booked the sale.

Update: Actually its not so much of an update, as an exclamation point. I love this quote from Scot Devitt of Stifel Nicolaus "To us, Amazon.com is the Wal-Mart of the 80s, the Target of the 90s or the Costco of the early 2000s, and is a must-own security,"

If you are an online seller wouldn't you want to hitch your ride to a company like that?


Just my 5 cents

3 comments:

Anonymous said...

There is a petition on the eBay Stores board with 2200 or so seller signatures requesting the removal of the "stars" rating system.

Instead of taking this suggestion into consideration they decide to eliminate seller FB for buyers entirely.

They treat sellers like dog crap and it will catch up to them eventually.

Anonymous said...

"If you are an online seller wouldn't you want to hitch your ride to a company like that?"

Uhmm...not really.

Randy Smythe said...

Well, if you can go it alone then yeah, don't hitch your ride with any marketplace.

If you do need a marketplace Amazon would be my choice.