Clarifications on Amazon Checkout post

August 8, 2008

ChannelAdvisor ChannelAdvisor By ChannelAdvisor

Last week in my haste to get a post up quickly about Amazon Checkout, I was unclear on a couple of things and have gotten many questions about it.

Specifically I want to clarify this statement:

“The fact that Amazon has a well documented history of using partner
data to their advantage in the third-party selling world will make this
argument very believable.”

The word documented I used here incorrectly implies that there is some formal/legal document around this topic.  That is definitely not the case to my knowledge and didn’t get my point across correctly.

What I meant was that in conversations with hundreds of sellers that are in one of Amazon’s 3P programs, the top concern invariably is over the fact that they do or may compete with Amazon retail.  In fact probably half of the sellers I’ve talked to have some specific example that usually sounds something like: “I started selling my top seller widgetX on Amazon merchants@ and then three weeks later, amazon was competing with me.”  or “Amazon went to my supplier and was able to get it cheaper and now I’m at a disadvantage.”

I’ve heard this kind of story so many times that to me it’s part of daily life of being on the Amazon platform.  And the one thing I always mention to sellers looking at Amazon M@ is that this is the top concern for existing merchants on the platform and to take that into consideration.  I’ll say something like: “If you worry that amazon retail may compete with you on the platform, then you need to take that seriously into consideration because it does happen a lot especially in the ‘hits business’ “.

On the flip side, having talked to many many Amazonians over the years they’ve had these programs, I do know they have worked hard to create a Chinese wall.  In fact there are literally two different companies.  The 3P stuff lives in Amazon services and the retail biz lives in amazon proper.  They do not flow data from the services side to the retail side, but they do flow data from the retail to the services and to third parties (for example, there are APIs to know when something is out of stock for 3Ps).  So I guess it’s a one way chinese mirror wall?

So if the Chinese wall exists, why are sellers concerned? 

Seller’s worry that the retail side is using their data to make their decisions.  Most of the time when you dig into it, it’s pretty obvious that Amazon probably would have started selling WidgetX regardless.

For example, “I was the first seller of webkinz on Amazon and then they came and destroyed me by going direct!”  This one is obvious, but then I had a trampoline seller tell me the same thing.

That’s one that there’s just no way to know what happened. We’d have to go back in time and have the seller not sell trampolines and then see if Amazon still started selling trampolines regardless of that seller’s activity. Thus there’s no way for the seller to prove that amazon did something and there’s no way for amazon to prove they would have been in the trampoline business regardless of that seller.

So part of life selling on Amazon is that you could be competing with them at some point and on some products.  Many sellers actually use this to their advantage and keenly watch for Amazon to go out of stock and then act as backfill on those ‘hits’ products and also enjoy the long tail where Amazon doesn’t play.  In my original post, I was trying to point out this fact of life on the Amazon platform and comparing it to Paypal/Google checkout that obviously don’t have a retail component so ‘direct retail’ competition isn’t a factor/concern.

Finally, I used the acronym AC and it turns out the official Amazon acronym is going to be CBA for ‘Checkout By Amazon’ – so if you talk to anyone at Amazon about the program definitely use CBA and not AC (unless you want to talk about Atlantic City).  CBA also fits more nicely in the family with FBA and other TLAs.

SeekingAlpha Disclosure: I am long google and eBay.