Amazon shipping for eBay sellers?

NY Times reports that Amazon.com will now offer order fulfillment services to independent sellers.

Amazon.com, the online retailer, is expanding a program designed to allow independent sellers to use its network of distribution centers to store and ship their products, according to Jeffrey P. Bezos, Amazon’s founder and chief executive.

Bezos also says,

We have this beautiful, elegant, high-I.Q. part of our business that we have been working hard on for many years,” he said. “We’ve gotten good at it. Why not make money off it another way?”

This move makes a lot of sense for the Internet retailer who has developed expertise in online fulfillment systems over the years and until recently managed order fulfillment for well-known brick and mortar shops like Toys R’ Us and Borders, who have since parted ways with Amazon. While the company still manages online shipping and order fulfillment for Target, the void left by the departing retail giants could potentially be filled by revenues from smaller independent sellers.

According to Techfold, Amazon Fulfillment works in four steps:

    1. Send your inventory to Amazon
    2. Amazon warehouses it
    3. Amazon fulfills it – finding it, packing it, combining it with other items, and shipping it
    4. Amazon manages customer service (returns)

While some small sellers are optimistic about using Amazon’s vast infrastructure for their shipping needs, not all are biting.

For two and a half years, John Brown of Lafayette, Ind., has sold rare books and educational audio and video programs on sites like Amazon, eBay’s Half.com and his own site, Shelfmasters.com. To handle orders, he rents a 4,400-square-foot warehouse and employs two full-time workers.

Shifting fulfillment to Amazon’s warehouses would save him $2,000 a month in rent and utilities for his warehouse, he estimates. But Mr. Brown has held back so far, in part because Amazon does not yet let Fulfillment by Amazon’s customers in the United States ship their products internationally, or by overnight delivery.

He is also bothered by the use of brown Amazon.com boxes for the merchandise he sells on the other e-commerce sites. “My other selling sites are not going to think well of that,” he said, because it could lead to consumer confusion. “And it’s not like I can afford to anger those other sources.”

These other ‘sources’ could very well include eBay. In addition, some smaller businesses are also wary about competition from Amazon itself during peak holiday times, when priority may be given to Amazon’s internal orders. Analysts who cover Amazon aren’t very excited either and some question if diverting resources away from core business is a wise move.

Expanding the fulfillment program to include non-Amazon sellers “almost suggests they are so confident with their core business that they can expend resources and management time on this,” said Safa Rashtchy, an analyst with the investment bank Piper Jaffray & Company. “But the core challenges have never been larger. To some degree this is a distraction.”

Whether or not, Amazon has worked out the kinks in its system and whether it can cost-effectively manage this expansion to include independent additional sellers remains to be seen.

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2 responses to “Amazon shipping for eBay sellers?

  1. This is indeed very interesting business model and will be watched deeply. The other warehousing and fulfilling giants like Dell, Costco and Walmart may follow this lead soon.

    Obviously the benefits from this business go to all concerned parties, the online retailer, the resellers and the consumers. The online retailer will get bigger with larger customer base, the online retailer will get larger website hit which will open ad revenue. The resellers can save a lot from outsourcing the carrying cost and headache of fulfillment and customer service. This will open doors for anyone becoming an online merchant without worrying about infrastructure. The consumer should benefit from the competition, singular market place and not to worry about creating numerous user account at different seller site. Recently I bought few things from Target, via Amazon. I was able to use my existing Amazon account without creating a new account at Target. That was very convenient.

    While all these things look rosy, there will be hurdles and conflicts. To name a few: Sharing ad revenue, pricing models, fulfillment policies, system overload during holiday seasons, additional time required to resolve customer issues since a 3rd party is involved which would send the customers to direct retailer, bad reputation of one reseller may form an opinion about other good resellers.

    Ebay marketplace trust is largely based on consumer feedback, otherwise there is no way to trust the sellers, because they are the individuals with no or less responsibilities. Even with the feedback, there are numerous fraud and cheating case which eBay is mostly unable to handle. I personally lost over 1000 dollars in a fraud case and eBay was totally unable to help me, the victim. Someone in Texas put an expensive item on ebay. I won the bid, send him money over paypal. And next day he vanished. In this out of state transaction, no one helped me to recover the money: eBay, the police or the civil court. This is a huge loophole which must be addressed if eBayers sell their trade in Amazon.

  2. Hi Prabhat,

    Thanks for the great comments! This news is a win-win for all concerned but as you rightly pointed out there are obvious and not-so-obvious pitfalls.
    I work at eBay but please bear in mind that anything I write here is my own opinion and not a statement from the company. It’s unfortunate that you had a bad experience. From what I understand, PayPal has buyer protection coverage and that is designed to protect consumers in cases like these.
    Your case clearly highlights the need for better safeguards at all Internet retail sites (where individual buyers and sellers interact) and make them safer for consumers.

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