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Amazon adds merchants
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September 29, 1999: 5:06 p.m. ET
E-commerce firm's zShops lets anyone sell goods through its site
By Staff Writer John Frederick Moore
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NEW YORK (CNNfn) - Amazon.com Inc. took a major step in its quest to become the leading e-commerce portal Wednesday with the introduction of a new service that allows anyone to sell merchandise through its Web site.
Beginning Thursday, anyone -- from retail merchants to individuals -- can sign up to offer their wares through Amazon 's (AMZN) zShops destination.
The move provides another source of revenue for the Seattle-based firm, which has expanded beyond its flagship sales of books and music into all areas of online merchandising. It also allows Amazon to add thousands of items to its site without incurring huge start-up costs.
Amazon shares soared 15, nearly 23 percent, to close at 80-7/8.
Analysts quickly applauded the initiative, noting that it will allow Amazon - already one of the most popular Internet firms -- to expand its reach and relations with its 12 million customers.
"It positions Amazon as a shopping portal, enhances their total market opportunity and serves to leverage their technology base and relationships forged with their customers," said Chris Vroom, an analyst at Thomas Weisel Partners.
"This will drive faster revenue growth at a much higher return on capital because there are no fixed assets required," added Vroom, who reiterated his "strong buy" rating on Amazon's stock after the announcement.
Merchants will pay Amazon a $9.99 monthly subscription fee to sell up to 3,000 items. zShops participants who plan to offer only a handful of items can list them for 10 cents each. All sellers are required to submit their checking account information to Amazon when signing up for zShops.
Amazon processes the transactions for zShops merchants, depositing money from sales directly into the seller's checking account.
Jeff Bezos, Amazon founder and chief executive officer, said more than 500,000 new items will be available through zShops, though he declined to disclose how many merchants had signed up for the service.
Bezos said zShops brings Amazon closer to its goal of offering online shoppers universal selection.
"We want shoppers to be able to find anything online," he said. "With zShops, we become an even better shopping destination."
Although zShops will appeal to many ordinary people who wish to sell goods online, Bezos told CNNfn that Amazon has signed up some well-known retailers, including Garden.com (GDEN) and Levenger.
Financial risks
Amazon's move doesn't come without risks. Because anyone willing to pay $9.99 a month can take advantage of the service, consumers could become victims of unscrupulous sellers. To that end, Amazon will guarantee refunds of up to $250 for items paid by check or money order.
Shoppers who use Amazon's 1-Click purchasing service, under which consumers need to enter their address and credit-card information only once for any future purposes, will have their purchases guaranteed for up to $1,000.
"We're standing behind the transaction with our own pocketbook," Bezos said.
"It's going to be difficult to make sure that customer satisfaction remains high," Vroom said. "That's because Amazon has no control over the merchandise being sold."
The company is deflecting potential controversy, however, by banning zShops merchants from selling guns and live animals. Earlier this year, eBay Inc. (EBAY) ended firearms auctions through its site.
Amazon also has seen its stock price take a hit over the past few months as it continues to spend more on expansion as its quarterly losses continue to grow.
"There will probably be a modest increase in expenditures," Vroom said. "But relative to what Amazon will spend on marketing to attract new customers, it should be relatively minor."
Bezos declined to comment on how the zShops launch will affect the company's upcoming quarterly results. He indicated, however, that the service should add to Amazon's gross margins because zShops allows the firm to add merchandise to its site at a minimal cost.
Since its launch in 1995, Amazon has expanded beyond book and music sales to offer toys, consumer electronics and hosting auctions. Bezos said the addition of zShops won't preclude Amazon from making investments in other e-commerce firms.
"When we see an area that's underserved, we're going to invest in that area," he said.
In addition to the $9.99 monthly fee, Amazon will collect a fee of 60 cents per transaction for payments made with 1-Click, as well as 4.75 percent of the final sale.
Bezos also said the company will implement a revenue-sharing model with the more successful zShops sellers, taking between 2 and 5 percent of the profits on items sold, depending on the price. Bezos didn't elaborate on what criteria Amazon would use to determine which merchants it will share profits with.
Along with the zShops launch, Amazon introduced a new search tool that allows online shoppers to find merchandise through its site, zShops merchants and other Web sites.
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