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Auctions getting lost in Amazon's jungle
By Troy Wolverton
Amazon.com is quietly scaling back its once high-profile online
auction business.
In recent months, the Seattle-based company has cut staff in its online
auction department, reduced customer service dedicated to it and closed its
live-auction affiliate, company and outside sources say. In addition,
Amazon no longer has a manager assigned solely to auctions and has turned
its focus to other e-tail businesses.
Amazon's withdrawal from the auction market is a testament to the amazingly
rapid ascent and decline of the industry bellwether. Its auction site was
launched to much fanfare two
years ago, at the height of the Internet's commercial boom and the peak of
the company's grand plans to expand its empire. Many analysts and industry
observers predicted that with
Amazon's marketing muscle and reputation behind it, the auction site would
pose formidable competition for industry leader eBay.
Initially, Amazon's site seemed to have a lot of momentum. Unlike eBay,
which at the time largely focused on small sellers, Amazon courted merchants such as
Cameraworld.com and Gear.com to help jump-start its auctions. Industry
analysts praised the move, projecting that revenue from
business-to-consumer auctions would soon outstrip that from
person-to-person auctions, eBay's bread and butter.
Amazon even caught a break from eBay. Soon after Amazon launched its
auction site, eBay suffered through several multihour outages that left members fuming
and threatening to take their
listings to other auction sites.
But despite these advantages and positive reviews from buyers,
sellers and industry analysts, Amazon's auction site never took off.
Although the company says its auctions carry some 800,000 listings--which
would place it second behind eBay--others estimate the total to be about
half that number.
eBay's share of consumers' online auction spending rose from 57.8 percent in May 2000 to 64.3 percent in May 2001, according to Nielsen NetRatings. In contrast, Amazon's share fell from 3.2 percent to just 2 percent, placing it fifth behind eBay, uBid, Egghead and Yahoo.
Since redesigning its site last
summer, sellers say the company has rarely promoted auctions as one of its
featured stores. The importance of this is "extreme," said Rosalinda
Baldwin, who heads up The Auction
Guild, an organization that publishes a newsletter on the online
auction industry.
"Unless someone knows Amazon has auctions, they won't go look for them,"
Baldwin said. "Amazon has totally marginalized their auctions."
The problems started early. Soon after the launch, many of Amazon's charter
merchants pulled out of the
venture, complaining of low prices for their goods and clueless customers
who did not understand the auction format. Amazon struggled to clear the auction site of listings
for illegal weapons and other
controversial items. Sotheby's initially had trouble with customer service and
shipping orders placed through its joint site with Amazon.
And although similar problems have hit eBay, the troubles seemed worse for
Amazon because they ran against the company's reputation as an easy,
family-friendly place to shop.
Last fall, Amazon and Sotheby's closed their joint site. And in
February, Amazon shut down LiveBid as part of an overall corporate
restructuring that included 1,300 job cuts.
Mike George, who now heads up Amazon Auctions as part of a larger role,
said while there is less emphasis on auctions, they will remain part of
Amazon's strategy. George also oversees Amazon's Marketplace, the company's
zShops storefronts and its deals with Toys "R" Us and Borders. George succeeded Jeff
Blackburn, who moved from head of Amazon Auctions to head of the company's
digital initiative, overseeing music downloads and sales of e-books.
That was not the only personnel change. As part of its layoffs earlier this
year, Amazon cut back on customer service dedicated to auctions, sellers
say. Although the company still provides live customer support for its
sellers--something eBay and Yahoo provide to few of their own sellers--the
hours have been curtailed and no one is available on weekends, when many
sellers list their auctions.
"That's the one place that Amazon really stood out," said Perry Calton, a
seller from Lawton, Okla. "Amazon was providing something above and beyond
what the other sites were providing."
George confirmed that the company cut jobs within its auction department
but declined to give details.
"We as a company publicly let go about 1,300 people. No one escaped that,"
George said. "We have naturally seen a change in headcount around the
company. Auctions was not unique in that regard. We are actually sized
appropriately in auctions."
But the cuts prompted at least one high-profile defection among the
sellers. eZiba.com, which sells handcrafted goods and is partially owned by
Amazon, decided in April to begin auctioning goods on eBay
after previously selling on Amazon. Although eZiba's sales on Amazon were
successful, the company decided to move because "the people we worked with
were no longer there," company Chief Executive Bill Miller said. "They laid
off all of the people we worked with."
Amazon's vision for its auction site seems to have narrowed as well. Unlike
eBay, which has expanded from its core collectibles market of beanie babies
and Pez dispensers into used
cars and Sun Microsystems
servers, Amazon is moving in the opposite direction.
"Auctions answers a certain need," George explained, but that need is
limited to the selling of items that are "truly collectible or truly rare."
As the company has scaled back in recent months, glitches have broken out.
In one instance, Amazon had to credit some sellers after they did not receive promotions they
had paid for. In another, bidders could not use the proprietary payment
system to pay for their auctions. And this spring, technical problems caused dozens of auctions, zShops
and Marketplace listings to disappear from the site.
There are additional problems that have not been widely reported, sellers say.
"Lack of customer support is extremely apparent," said Spencer Zink, an
Amazon seller from Torrance, Calif.
Others lament that Amazon is retreating just when it could have taken
advantage of fee hikes at other online auction sites.
Earlier this year, Yahoo started charging sellers to list their
auctions for the first time, causing its listings to plummet. Then eBay raised its rates--leaving Amazon
as an attractive option for cost-conscious buyers and sellers.
Amazon responded by essentially raising its own rates, initiating closing fees on sellers
who used its proprietary payment service. Previously, Amazon exempted those
sellers from its final value fees, which are based on winning bids. The
move followed a rate increase
last summer that left many sellers shaking their heads.
"I think they missed the boat when Yahoo dropped off the face of the Earth
with their auctions," Zink said. |
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