eBay vs. Amazon Lesson for Publishers

You’d think the war between two e-commerce giants eBay and Amazon wouldn’t matter much to CPI readers, but thanks to unaddressed channel conflict facing magazines today, I believe a strong parallel exists between the worlds of these two e-retailers and publishing in general. Let me explain.

EBay’s March 28th deal to acquire online service vendor GSI Commerce hopes to challenge Amazon’s turf in streamlining the process of seller shipments. It will enable merchants to offload order fulfillment and processing resulting in eBay expanding its merchant relationships and gaining a piece of the action. GSI provides warehousing, inventory control, shipping—functions that eBay lacks and Amazon delivered in spades to the tune of a 40% uptick in sales last year versus eBay’s 11%. What’s more, it signals a shift among consumers away from eBay’s core auction business toward immediate fixed price purchases, Amazon’s home turf. 

But here’s the rub. The GSI deal included the company’s ShopRunner program, a free-ship membership plan nearly identical to Amazon Prime. (For those not in the know, a $79 annual Prime membership gets you free shipping for any qualifying Amazon item. And that means consumers inevitably narrow product searches to Prime-only merch, leaving non-Prime sellers at a disadvantage. Yet these folks aren’t Amazon’s virtual bread and butter.)

With ShopRunner, you’d think eBay  would now have the perfect Killer App to Amazon Prime? The latest scoop, however, says eBay will unload ShopRunner for fear of alienating their sellers whom, for whatever reason, could/would not participate in the program. As a result eBay remains hostage to their smaller merchants while Amazon cranks up Prime to the benefit of their core constituency. 

So where’ the relevance to publishers? As I suggested early on, channel conflict is the hobgoblin of overly risk-averse companies unwilling to embrace new technology. Online pure-plays are selling automotive products direct to consumers, dispensing a wide range of automotive-related news and features, posting new car reviews, publishing immediate auctions results… all without the baggage and legacy costs associated with printing magazines. They are successful, in part, because they are able to execute from a clear strategy without being held captive by a diminishing group of customers without computers. And their customer demographic combine tech-savvy Boomers and a good dose of  today’s youth that only know music through downloads. Okay, so you say your publication’s “multi-channel” strategy means its equally effective online and in print? If your online ditty relies on repacked print such as ezines, I’m afraid you’re not in the game.

It’s fascinating to watch Amazon and eBay duke it out. I recall when launching the Mobilia Magazineonline auction section of our website in 1999 (after four years already providing web-based content), Amazon attempted to challenge eBay with a new auction format. Their failure to seize the high ground then perhaps worked in its favor as it allowed Amazon to fully devote itself to fixed price sales backed by superior fulfillment. You might say that the auction format is receding from consumers’ buying patterns leaving eBay at a competitive disadvantage, yet they now have the opportunity with ShopRunner to go for broke. But they blinked and if I was an eBay shareholder I’d be mighty pissed right now.

The company’s $2.4B price tag for GSI will impact eBay’s earnings this year and who knows how many more in the future. And eBay is now in the warehousing business, an anathema to their fundamental business plan.

Magazine publishers who tell advertisers they reach a cadre of non-PC buyers are only fooling themselves. Anyone selling a car, part, or collectible in today’s digital world simply will not, with very few exceptions, hassle a stack of 4X6 glossy photos and wait for grandpa to write back.

Bottom line, the limitations of eBay’s receding pool of small merchants has become eBay’s limitations. Don’t let this twisted parallel universe become your magazine’s future.

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  1. At first I thought this was a stretch but I actually get it. Even new tech firms struggle with managing their customers when doing new programs that might cannibalize sales. Darwin!

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