The eBay Economy

Much has been made of the eBay, the way it has transformed garage sales, small businesses and not so small businesses. It approximates a perfect market more closely than comparision shopping engines like Dealtime, MySimon or Froogle. My clients have been found online at thte weekend checking the current bid price on old car speakers they sold via eBay and a friend in the Philippines has a small business selling vintage watches to collectors worldwide. eBay’s laissez-faire attitude to allow self policing of its communities via recommendations has made has been a blessing and curse. eBay has become a lightning rod for issues involving grassroots merchantism over the web, he brand has to constantly fight against perceptions of fraud, misselling and piracy. eBay has successfully fought off or purchased a succession of competitors, who in the UK now remembers brands like QXL? One less remarked on winner in the eBay economy is Amazon. Its zShops and Marketplace allows small businesses and consumers to reach customers via one of the most highly visited properties on the web. In addition, Amazon has a win-win approach on the transaction. If consumers buy off Amazon its a traditional sale, the company makes it margin, if the consumer purchases a good from Marketplace or zShops Amazon takes its cut on the transaction. This is the eBay model by stealth, so far having shopped using Marketplace and zShops for the best part of 18 months I have had no complaints and have been able to obtain out-of-print books such as Moshe Dayan’s autobiography.

With this in mind I was surprised to read this criticism of Amazon moving beyond books in Frank Barnako’s Internet Daily email newsletter for CBS Marketwatch below. For the record, I would contend that most of the 3 billiion or so accumulated losses were made when Amazon subsidised books and delivery to create an online market in the first place and on expensive brand building advertising campaigns.

The author or co-author of 11 books about branding and marketing thinks the man behind Amazon.com (AMZN) does not deserve the kudos of Business Week magazine. Al Ries said Jeff Bezos should not be touted as one of the greatest innovators of the past 75 years because … Amazon.com doesn’t make money. Writing on AdAge.com, Ries says at the rate Amazon.com is going it will take the online retailer 85 years to break even from its accumulated $3 billion in losses. “Amazon.com pioneered a number of Internet innovations like one-click shopping,” Ries concedes.But “Bezos went off the track” by adding dozens of other product categories to the business.” Bezos should emulate Nintendo (NTDOY), Ries said. “If you want to make money, keep your brand focused. If you want to make the pages of Business Week, be our guest and get into everything.”