Growing pains for Amazon's used goods

NEWS

A wave of glitches at Amazon.com's storefronts over the past week is just the latest problem for the company's burgeoning used-goods business. Dozens of used-goods merchants, often just individuals moonlighting as booksellers, complained on the e-tail site's discussion boards about such things as not being able to list new items or access their accounts. In many cases, the sellers, who pay Amazon a fee to sell products on its site, said that they were completely prevented from doing business. "This is getting me real annoyed," said one post from a seller who couldn't put up new listings on Amazon. "I don't know what they are doing, but something is wrong." An Amazon representative said on Friday that the problems were related to technology changes the company made on Tuesday to part of its storefronts but that the problems had been fixed. But sellers reported ongoing problems over the weekend. An Amazon representative did not return calls on Monday. Amazon.co.uk said that they were looking into the situation in the UK. The problems follow other technical glitches several weeks ago and a public-relations dust-up after publishers criticised the used-book sales section and called for a boycott. Amazon has seen significant returns from these used-goods sales. Individuals and companies selling used goods can set up virtual stores at the storefronts, called zShops, or list their goods on Amazon's product pages in a feature called Marketplace. This electronic swap meet has turned into a cash cow for the company. In the fourth quarter, used goods pumped up unit sales 23 percent to $38m, the company said in documents filed with the Securities and Exchange Commission. While Amazon can charge sellers $39.99 each month to list an unlimited number of Marketplace items, the costs for the company are relatively small, Jupiter Media Metrix analyst Ken Cassar said. "The investments are pure technology," Cassar said. "All they have to pay for essentially is putting the listings up. It's a more appealing business in many ways than retail." Three weeks ago, the storefronts suffered periodic blackouts and other nagging malfunctions. At the time, Amazon said the problems, which included sellers being unable to change prices or let customers know an item had been sold out, were caused by "maintenance," but the company did not provide further details. A week later, the used-goods section had problems after The Authors Guild accused Amazon of undercutting sales of new books by "aggressively promoting" the sale of cheaper used books, for which authors receive no money. The group called on its 8,000 members to boycott Amazon. Usually one of Amazon's representatives would have responded to the guild's charges. But in what analysts say is perhaps the best indicator for how important the used-goods business is to Amazon, chief executive Jeff Bezos himself took up Amazon's defence. In an email to thousands of merchants who sell on Amazon, Bezos said that the sales of used books encourages the sale of new books because he says buying some books at a cheaper price "gives (consumers) a budget to buy more new books." Some analysts agreed. Jeetil Patel, a financial analyst who covers Amazon for Deutsche Bank Securities, argues that while used-book sales do "cannibalise" sales of new books, Amazon is at the same time expanding the book-buying market. "The (sale of used books) is drawing a different class of buyer," Patel said. "Historically Amazon has attracted purchasers of new books, but now you may attract a used-book buyer as well. Buyers of new books will likely continue to do so." Amazon competes with eBay's Half.com and Yahoo to attract sellers of used goods. But some analysts say that Amazon's flea market should continue to grow. "You hit snags along the road, in terms of having the infrastructure catching up with volume," Patel said. "Amazon is obviously adding more functionality to its system."

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