Saturday, 21 September 2013

Amazon: the first chink in the armour?

OK, I know I'm probably a bit slow with the flow here, but did anyone else think that the announcement by Amazon that marketplace sellers - in the EU at least - will now be able to sell their products cheaper on their own site than on the Amazon marketplace is more strategically significant than it might look at first reading? (See for example the story as reported on the BBC news site).

The trouble with Amazon is that too much of it looks more and more like a play on price alone, albeit one powered by the cash-cow of its awesome core media/books business. It looks more an more like 4 separate animals, although of course being able to leverage a single CRM view has to be a huge boost:
  1. cash cow media/books; even here it is obsessed with being the cheapest. When did you last see a seller listing cheaper than Amazon itself, assuming Amazon holds the title at all? Or take a look at the royalty rates for publishing on Kindle; basically there's a massive incentive to keep the title at < $10, and you absolutely have to commit to being cheaper than the print version
  2. 2nd rate (and generally expensive for Sellers) marketplace; eBay, Allegro (in countries where eBay hasn't made it) are usually the #1
  3. Reasonable IT services business, into which it is pouring investment
  4. Retailer outside media/books: totally a play on price, and dominated by the nightmare category of consumer electronics. The website isn't even that good at selling presenting this stuff (OK it is evidently good at selling lots of it). Margins, given how coy Amazon is on the topic, are evidently a big issue
Now that the "last man standing" multichannel retailers are starting to fight back properly - viz Dixons making a profit again at last, or Best Buy making proper price promises - then maybe, just maybe, price price price can't continue to be the be all and end all of Amazon's business. It certainly wasn't where it started in books.

It's just had to back down in a very small way. Is this the thin end of the wedge? Maybe the fact that it is preferring to invest in the services side of the business in preference is a sign that Amazon itself is reading the tea-leaves the same way.

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