Amazon expands its mix with auctions
by Helen Jung
Seattle Times technology reporter
Sotheby's probably would never have Seattle's Ruby Montana in
its auction house, but Amazon.com certainly will.
When Amazon.com debuts its online auction site today, the quirky
owner of the even quirkier Ruby Montana's Pinto Pony shop will
be one of the 117 charter merchants to offer items for sale -
including such Montana specials as vintage salt-and-pepper
shakers and whoopee cushions.
Amazon.com's reach to 8 million registered customers throughout
the world will give Montana an audience that would never walk
by her Second Avenue store of collectibles, she said. "I'm beyond
thrilled," she said. "I burst into crying when they called me."
But as well as giving power for small businesses and individuals to
get into the Internet retail game, the auction site is also the latest
expansion of the Amazon.com empire - this time into one of the
hottest areas of Internet commerce. Despite ever-deepening
losses, the company is gambling that building up its massive
customer base and giving users everything they might possibly
look for will be the long-term formula for dominating the Web
economy.
But it is a gamble. "We're complicating our business by entering
these new areas, and it's easy to put your foot in it when you're
doing all these different things," President and Chief Executive Jeff
Bezos said.
Investors seem to like the strategy, however. Amazon.com's
stock rose $10.563 yesterday on news of the auction service. It
kept climbing today, rising $15.125 to $164.75 in late trading.
Starting today, Amazon.com's home page will have a fifth tab, an
"auctions" button next to the books, music, video and gifts tabs
already crowding the top of the site. Since opening for business in
1995, the company has aggressively built up its product mix by
either offering it themselves or partnering with companies that did.
That has led to such investments as a 46 percent stake in
Redmond's drugstore.com and its 50 percent stake, announced
yesterday, in Pets.com.
When it came to auctions, the company decided to build it itself.
Many of the auction site's features are similar to Web
counterparts. For instance, Amazon.com's site will include ways
to allow users to rate sellers or buyers, helping to create a
self-policing community. It will also charge competitive fees for
sellers to post items.
Amazon.com, like other sites, also allows customers to delegate
the bidding process to the computer. The customer can privately
plug in the maximum price he or she would be willing to pay for an
item. If another customer bids a higher price, the feature will plug
in a higher bid, dollar by dollar, until the first customer wins or the
price exceeds the customer's maximum.
But Amazon.com's auction site, which today will have more than
10,000 items also includes unique aspects.
Amazon.com plans to link related items sold on its auction site
with similar themed books, music or videos, said David
Schappell, Amazon .com product manager.
To protect customers who are victims of fraud, Amazon.com will
refund bad transactions for up to $250. Its chief competitor,
eBay, holds an insurance policy to cover transactions up to $200,
with a $25 deductible.
Still auctions are a whole new thing, warned eBay, which has built
up a strong name - and a profit - since starting in 1995.
"Amazon.com is a savvy Internet competitor and has done a very
good job in the area of business to consumer Internet commerce,"
said Kevin Pursglove, senior director of communications for
eBay. "However this is a very different business. . . . Over the
past 3 1/2 years, eBay has focused on people-to-people trading
and has developed significant competitive advantages."
And Amazon.com may be trying to do too much, too fast, said
David Lucking-Reiley an economics professor with Vanderbilt
University and an online auction expert. Amazon.com "runs the
risk of imploding before it ever turns a profit," he said. Catching
up won't be easy, even for Amazon.com.
For example, he said, look at Yahoo! Auctions, a 6-month-old
venture. Not only did Yahoo! similarly boast a large audience, but
it wasn't charging sellers to post listings, he said. "They still have
less than one-tenth the number of listings of eBay," he said.
"During that same six-month period, eBay's business has more
than doubled, and they show no signs of slowing."
"The net result of this competition may be that none of the players
make any profit on auctions," he said. "Very good for the
consumers, but bad for the companies."
Information from Bloomberg News is included in this report.
Helen Jung's phone message number is 206-464-2742. Her
e-mail address is: hjung@seattletimes.com
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