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Merchants pull out of Amazon Auctions

Some companies complain that shoppers are confused by auctions of items that are also available at retail prices.

The auction business has been great for Amazon.com, but some of the 100 charter merchants who helped the company launch its auction site are pulling out in frustration.

The merchants say shoppers, confused by auctions for goods that are also available at retail, are bidding too low and complaining that minimum bids, set by the merchants, are too high.

"In retail, people understand where the margins are," said Walt Mulvey, chief operating officer of Cameraworld.com, which stopped listing items for auction two weeks ago. "In auctions, people didn't." Cameraworld.com executives also said the company's policy of matching final auction bids to its retail prices when the winning bidder offered more than retail was also confusing to consumers.

But Cameraworld.com hasn't given up on the auction format. The Portland, Oregon-based photographic equipment retailer, which says about 40 percent of its revenues come from online shoppers, today added auctions to its e-commerce site. Items up for auction include returned, refurbished, discontinued, and excess goods. The company also plans to add content that will give it a "portal" feel, and hopes to add interactive features that will enable it to sell more complex products online.

An informal survey of Amazon's charter merchants, a list that includes CyberShop, TechStore, and Garden.com, shows that few have continue to hold auctions there.

TechStore, a Novato, California-based retailer of computer products, is reevaluating whether to continue selling goods on Amazon Auctions, according to chief executive Bejan Aminifard. The exposure has been great for business, says Aminifard, but bids have been low.

"We're trying to decide if bids are low because Amazon Auctions are new and not generating the traffic yet to generate reasonable bids or if customers participating in auctions are so price-sensitive that they'll never even approach the retail model," Aminifard said.

Cameraworld had another reason for pulling out of Amazon Auctions: the risk of unchecked feedback on the site. Like eBay, Amazon allows auction participants to post comments about both buyers and sellers, although only feedback from those who complete transactions with an auctioneer can influence their "star" rating. Nevertheless, knowing that anyone could post commentary about Cameraworld.com, regardless of whether they'd done business with the retailer, worried chief executive Alessandro Mina.

"People were bidding $100 on a pair of binoculars that go for $10,000, and they get upset and post commentary," Mina said.

Products that don't get reasonable bids probably aren't suitable for Amazon Auctions, according to spokesman Paul Capelli. "When people bid low, then those items are no longer going to appear on Amazon Auctions," Capelli said. "What we're looking for is unique and interesting items," he said.

At least one merchant who continues to sell merchandise on Amazon Auctions agrees. Randy Silver, owner of GolfDiscount.com, said he is happy with the prices he's gotten from Amazon bidders.

Silver, who auctions close-out and excess items on Amazon Auctions, says the benefits of selling far outweigh the potential negative effects. He says customers are happy to pay the minimum bid for GolfDiscount.com's items, because they are already priced well below retail.

On Amazon Auctions, Silver added, the most he'd pay for a transaction is 5 percent of the transaction. "If that's the total marketing cost as a percent of sales, I'd be very pleased," he said. "The fact that a number of auctions have gone above my minimum price is also good."

According to Capelli, Amazon isn't worried about the defection of charter merchants, particularly because there was no contractual arrangement. "We are designed to be a consumer-to-consumer auction site," he said.