Amazon: Are we creating a monster?

This week’s excitement was Hello Baby‘s Amazon.fr account being suspended as our order defect rate slightly exceeded Amazon’s 1% ‘target’*.  We got a warning email (which contained no specific dates on when our account might be suspended) and then without so much as a by your leave, our account was suspended and I have no idea when it will get reinstated.

This merely reinforced my feeling that Amazon is getting too powerful and this is not altogether healthy.  As an online retailer that depends on Amazon for a large proportion of his business, this might seem a bit ungrateful but the concentration of power in one retailer I think is bad for everyone in the long run.

Amazon doesn’t care

Our Amazon.fr account accounted for 10% of our sales and it was turned off, just like that.  The fact that we give Amazon as a whole about £50,000 in fees per year has no bearing on our case and I have been unable to contact anyone who might be able to help.  I know that this an individual case, but overall the experience of selling on Amazon is one dealing with a totally faceless organisation.  With Amazon, it is a case of playing by their rather strict rules or not at all.  They are the Apple of the online retailing world.

Amazon makes retailers pay through the nose

At 15%, Amazon is by far the most expensive marketplace.  For comparison eBay and Play.com work out at about 8%.  You could argue that we don’t have to sell on Amazon, but as Amazon grows its market share it is becoming an increasingly important sales channel for small businesses.  Most small online retailers have I talked to report that Amazon is their least favourite channel, but it is where the sales are.

Amazon has all the data

Amazon’s marketplace was a fantastic idea for Amazon and I suspect has been responsible to a large part of its phenomenal performance of late (I’m too busy shifting baby stuff to look at company reports).  Not only do they expand their catalogue making them a one stop shop for just about everything, but they can use other people’s inventory to discover new stock to buy.

For example, I used to sell the  Safety 1st Swivel Bath Seat for 11.99 by the pallet load on Amazon.  The bottom fell out the market one day when Amazon started selling it at £8.99.  I’d found Amazon a great new product to sell.

Amazon controls the customers

Amazon’s marketplace rules forbid sellers from doing the following:

• Emailing the customer directly (all messages go through Amazon)
• Emailing any sort of link to the customer
• Sending any sort of packing slip which identifies the seller’s website etc

The seller is basically not allowed to develop any sort of direct contact with the customer.

One day we may regret what we have lost…

I can’t blame Amazon for what they do.  That is creative capitalism for you and they are very good at it.  As an organisation they have been very proactive as getting businesses to sell on their marketplace and they control it very tightly.  It is convenient for consumers and offers a good level of service.  However, in letting Amazon get too much market share we will lose some things we may come to miss:

• Businesses as curator.  Offline media retailers do provide a selection of products which they think worthy of attention, saving the customer time and effort.  You can argue about the necessity of these service and whether they are being replaced by social media, but there is something nice about being about to go into a shop and talk to experts.  (My hero) Pete Townsend makes a similar point in his Peel Lecture recently when he referred to iTunes as a digital vampire.  iTunes charges a huge commission and provides little support to up and coming musicians.
• Shops a showrooms.  We’ve all looked at products in the shops and then bought them online.  It is a bit of a tragedy of the commons, we are using a resource without paying for it and one day it won’t be there for us.  We might miss it.  Amazon has been hastening the decline of the offline shop by actively encouraging shoppers to use its app in store to comparison shop

* for those people who care, the ODR is the % of customers who have left negative feedback + customers who have started an A-Z claim