David Murray will close his CD Exchange shop in Kingston this summer. But he doesn’t blame competition from Amazon.ca.
Mr. Murray said his bricks-and-mortar store would have closed a year earlier had he not been able to sell CDs on the online giant’s website to supplement his income.
Debate continues about U.S.-based Amazon.com AMZN-Q plans to open a new Canadian warehouse to support its Amazon.ca site. The company’s competitors, ranging from Chapters Inc. to smaller, independent stores represented by the Canadian Booksellers Association, have expressed dismay at the potential impact of the multinational on the homegrown book selling and publishing business. One fear is that Amazon’s Canadian expansion could drive more mom-and-pop bookstores out of business.
But many sellers of books and CDs have, in effect, embraced the beast by accepting Amazon’s terms and agreeing to sell their wares on the Amazon site, directly to Amazon customers, giving up a slice of their profits in the process.
|
Read more of today's Technology stories at globetechnology.com |
Anyone can sign up to sell in the “Amazon Marketplace” and have their books, CDs and other products listed alongside Amazon.ca’s offerings. The only restrictions are on “publisher's proofs” – the sometimes collectible not-for-sale editions sent out early for review purposes – and CDs produced for review purposes, “bootlegs” or other unauthorized recordings.
Sellers pay $29.99 a month plus 15 per cent of the sales price as a “referral fee.” There’s also a “closing fee” that ranges from 24 cents for books and VHS tapes to $1.35 for software and video games. A seller who doesn’t expect to sell more than 20 items a month can sign up as an “individual seller” and avoid the $29.99 fee – but pay an additional $1.49 per item sold.
Amazon launched its Marketplace in the United States in 2000 and in Canada in 2003, but not without controversy. The Authors Guild complained at the time about the practice of selling used books alongside new ones, noting there are no royalties on used books. It asked its members in 2002 to stop linking to the Amazon site as a result.
The efforts did little to derail Amazon Marketplace, which now accounts for 30 per cent of Amazon’s unit volume, according to its securities filings.
Since Amazon records just the fee revenue from these transactions, it notes the Marketplace sales “generally result in lower revenues, but higher gross margin per unit. Since we focus on profit dollars rather than margins, we are largely neutral on whether an item is sold by us or by another seller.” Amazon disclosed no other details, and the company failed to respond to repeated requests for comment.
“Amazon really started off with the idea they'd do all the selling,” said Sandeep Krishnamurthy, a professor at the University of Washington-Bothell, just north of Seattle, who specializes in e-commerce. “Then they realized they were not profitable – they were growing too fast and losing money on every product they sold in some categories. With eBay taking off, they realized it was not about the company selling to one set of customers, it was about creating a marketplace. So for a long time, they've been in the business of enabling local companies.
“The ones who are really affecting local companies are the big boxes,” Mr. Krishnamurthy added. “If Barnes & Noble comes to your town and opens a monstrosity, that really affects the mom and pop.”
