Amazon.com Offends Gay Community

Amazon.com will likely take some heat tomorrow as it has become known that they apparently have been systematically "hiding" books deemed to be about non-heterosexual topics by changing classifications and making them ineligible for their ranking systems.

A reasonably-thorough article is available here, but expect more news on this tomorrow as the mainstream media picks up this story.

I know of this now because of the already-huge backlash on Twitter. I recently signed up for a Twitter account (to promote my ski wax company, Whacks Wax, which is coincidentally sold on Amazon.com) and the website's millions of microbloggers are tweeting furiously about this topic. (On a related note, I think Twitter is pretty pointless and unmonitizable, though that doesn't mean some bigger company won't buy it [after all, Google bought YouTube and eBay overpaid for Skype].)

Though some people are already tweeting for a total boycott of Amazon.com, that's obviously ridiculous. There will likely be some protests and LGBT spokespeople complaining through various news mediums, but this drama should blow over shortly. The only people that I feel are very wronged are the authors and publishers of the blacklisted books, so I do hope that the problems will be fixed and that their personal wrongs will be righted.

I think that Amazon's results may be materially affected by this in one of two ways.

On one hand, the calls for boycott may keep some people from making purchases. It is possible to still buy books from physical bookstores or other websites, so Amazon may give up a couple of percentage points of market share in the very immediate future (the next few days or weeks). But I expect that Amazon will quickly apologize and hope that this is all forgotten, and I don't expect any huge long-term effects. The simple truth is that Amazon is too big, popular, and powerful to get hurt by such a minor slip-up.

On the other, Amazon might actually benefit from this negative publicity. An unintended positive consequence may actually be additional traffic and sales on Amazon.com within the next few days. Amazon is obviously already a household name, but the attention Amazon may receive will likely drive MORE people to the site, as people read the site's name in their newspapers and hear it on the evening news. Amazon sells anything and everything - from books to banadages - so visitors may just curiously type in a desired item and end up buying it.

The bottom line is that huge companies like Amazon shouldn't bother to try to sneak things like this past the watchdog that is the internet community. It would have been better for them simply to have stated upfront that "due to new company policy, books with strong homosexual material will be ineligable for popularity rankings" rather than try to cover it up. In the age of Googling, Twitter, and blogging, someone is bound to stumple upon these types of things, and the discovery of secrecy causes a stronger backlash than what would have been initially suffered.

Amazon.com may be a little embarrassed that they got caught enacting this shameful policy, but they will continue to perform strongly as a company nonetheless.






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eBay: Personal Dissatisfaction, Investor Doubt, and I'm Gone.

Just a few months ago, I defended eBay’s business as it was being attacked on all fronts; fee hikes had disenfranchised big sellers, who were being lured by Amazon’s fulfillment program.

I proclaimed confidence in eBay’s marketplace, even as they began to squeeze too many pennies out of small sellers like myself (peddling my ski wax, Whacks Wax), right as Amazon.com was allowing sellers to list their items for free.

I also noted that PayPal was much of the reason to invest in eBay’s stock. PayPal still is a great brand, but Google is pushing hard to popularize its payment processing service, Google Checkout, by offering new buyers a free $10 discount on their first purchase.

My problem with eBay, the corporation, has grown from a personal problem, but I feel as though it also sheds light on many of the issues currently facing eBay, and it shows that they may be failing to properly address those issues.

I have been selling various goods on eBay for over five years through three different accounts. I began selling trinkets, mirroring eBay’s promoted image as a worldwide 24/7 garage sale. However, a few years ago, I invented and began selling my own ski wax, and eBay was a great market place to promote a brand in its infancy.

Over the years, I have sold approximately $10,000 of goods through eBay. My average selling price was no more than $10, so I logged about 1,000 transactions through the different accounts. Considering that eBay charges a listing fee, a final value fee, promotional fees (I often did choose featured listings to attract attention), and most of my payments were processed through PayPal (which charges a base fee AND a percentage of the transaction), I would estimate that I generated $1000-2000 of revenues for eBay and its entities over the years.

Now, in an effort to promote “marketplace security,” the account that I sold ski wax through (which generated the majority of personal revenue and eBay fees) has been permanently suspended. The account’s feedback rating (the metric that eBay uses to establish confidence in transactions) is excellent, with a 97+% positive rating, including about 400 total positive transactions. The other two household accounts also may be suspended – each of them was sporting a 99% positive rating.

However, the very last transaction I conducted resulted in a negative feedback, and because of some silly computer search eBay must conduct, my account was blacklisted and suspended. (An aside: The circumstance was unusual, and I refunded the customer’s money right after negative feedback was left, so the transaction was resolved. My integrity as a seller remains intact.) eBay suspended the account because of a “result of your violation of site policy on Seller Non-Performance” because I “generated unacceptable levels of buyer dissatisfaction in your transactions.” This is solely based on the one most recent feedback.

A reasonable person could see that I have established and re-established credibility as a merchant. A reasonable company would allow real customer service people to review and overturn suspensions such as mine when their computers clearly take transactions out of context. However, eBay seemingly will not let customer service employees breach official policy, even if the situation merits it.

eBay clearly has issues policing its increasingly-dangerous marketplace, and this is an example of an overreaction that may have broader implications. As many larger sellers are already flocking to Amazon or other auction websites, fleeing the stranglehold of the new fees eBay has imposed, eBay should not be barring willing merchants from using the website. Yes, this may be an isolated, individual incident, but it is an example of policy and bureaucracy of an inefficiently-large corporation destroying the very nuances that led to its success.

Whacks Wax will survive. I already began using Amazon.com’s fulfillment system last year, which streamlines my operations and makes selling my product immensely easier. An eBay presence was certainly beneficial to the company, but this past winter it accounted for the smallest percentage of sales yet. The nostalgia of eBay, where I had built my company from the ground up, may have been one factor that continued to attract me to the increasingly expensive marketplace.

Bigger niche sellers have no need for eBay anymore. Amazon is a worldwide marketplace that attracts deal-seekers just like eBay, except they charge no upfront fees. Merchants leaving eBay can spend the money that would have paid on fees (in my case, between 10-40% of final selling price) to invest in their business or advertise, and probably more than make up for lost sales.

eBay will always exist as a marketplace to promote knickknacks, but its heyday as a serious marketplace seems to have already passed . Now, through websites like pricegrabber.com and shopping.com (eBay owns the latter), consumers can quickly and easily find the cheapest price for a good, instead of having to devote hours to manual browsing as they would have to have done in the past (which led to bidding on eBay, a relatively-cheap marketplace). Powersellers with significant draw can simply promote their own websites, which requires a greater sunk cost but little (if any) incremental costs compared to eBay selling. As Amazon.com continues to expand into groceries, people may become accustomed to look there as a first place for anything they desire, not eBay, as may have been the case in the past.

Luckily for shareholders, eBay’s non-core businesses are continuing to grow the company as the auction marketplace has stagnated. PayPal is still the only widely accepted online payment processer, and no matter how many $10 credits Google throws at consumers to encourage them to use their checkout, PayPal’s dominance should continue. PayPal is also now being used unconventionally, as family may send remittances cross-border through PayPal, and traditional merchants (airlines, etc.) are now accepting it.

Skype also seems to finally be gaining some traction, and eBay has already written off most of the (ultra-inflated) value of the purchase it made a few years ago. Integration into the auction website has made Skype more relevant as corporations and consumers have simultaneously started to use it. Skype is now a positive contributor to the eBay brand, and if eBay chooses to get rid of it, they could probably sell it for more than the value they now have booked.

Still, the street continues to look at the auction website as the most important component of eBay’s businesses (which it is). That business is no longer growing. The exodus of Powersellers and banning of lowly, innocent, above-average sellers will not help stop the bleeding. eBay needs to focus on re-attracting the big sellers, possibly creating a different way for them to list items (think eBay stores, but better) that can rival the appeal of Amazon.com. If the core business continues to decline, it will be hard to make up that gap with the growth of other the brands.

I am angry and disappointed enough by my ordeal to sell my stake in eBay. Investments shouldn’t be an emotional decision, but I cannot have confidence in a brand that has treated me, a shareholder and merchant, so horribly. With few exceptions, brands with poor customer service are eventually passed over in favor of competitors that treat them better - I had personal phone calls with an Amazon Fulfillment representative a handful of times before I even set up an account, but I can’t even get a non-automated response when I’ve made eBay thousands of dollars. My decision was made for me, but it was time to move on anyway. eBay, I don’t need you, and many other sellers don’t either. Even if you don’t kick them out, they'll eventually leave.

Ebay and Amazon.com - From a Merchant's Perspective

As none of you (probably) know, along with writing this blog, managing my portfolio, and attending college, I also founded, own, and operate a small ski wax company, Whacks Wax.

(I founded Whacks Wax in 2004 as a sort of science project. But the wax worked well, so since then, I've been selling the stuff commercially, having now sold to customers in over 20 countries.)

I owe the existence of my little company to the internet, and for most of the company's existence, exclusively eBay. I set up a website to provide background information, but until this winter, virtually all of WW's sales (90+%) came through eBay. I loved and appreciated eBay; a magical marketplace existed where an unheard-of company could peddle their products for a tiny fee. I didn't have to borrow money to advertise - my item could be seen by many interested customers for virtually no cost to the company.

I'm still very content with eBay (though not a fan of the new fees - but more on that later). This winter marked a big divergence from WW's exclusively-eBay model of the past. By some stroke of SEO (Search Engine Optimization) genius or dumb luck, I managed to push my website into the top-ten results for ski and snowboard wax queries on Yahoo!. The influx of organic traffic created many more off-eBay purchases than in the past.

Also, this winter, I enrolled in a little-known program offered by Amazon.com called "Fulfillment." Fulfillment is a wonderful thing for tiny e-entrepreneurs like myself. Here's how it works:

With Fulfillment, the merchant prints out scannable labels and affixes them to his products. He then ships products to an Amazon.com warehouse (my warehouse is in Lexington, Kentucky, which is excellent because the area also has huge shipping hubs). Amazon scans the items as they enter the warehouse, and then store them right next to Amazon's own merchandise. Then, when someone purchases a piece of wax through my website, I simply provide Amazon.com with that customer's information, and they'll ship it out of their warehouse, usually the same day. (Also, a participating merchant can choose to sell their product through Amazon.com's website; my listing can be seen here.)

I actually decided to sign up in October because it was free through the end of the year, but now, all of that supply-chain streamlining will come at a price; Amazon charges:

• A flat fee per month for participation in the program
• A processing fee for each transaction
• A storage fee based on average square footage per month

(The above information is accurate to my best knowledge; maybe I'll be blindsided with some fee I don't know about this month.)


I have had almost 20% of my purchases come through Amazon.com, so it's certainly a powerful marketplace, even ignoring the Fulfillment service. Coupled with the organic traffic, eBay has become less important to me. That's a bad thing for them, especially as they hiked fees (in a way that hurts consistent sellers like myself most).

Here's a realistic example (based on my company) of how the higher fees will crush big sellers:



Current listing fees for a fixed-price listing of $199.99 of product: $2.40
20 $6 pieces of wax sell - $6 x 5.25%= .30c/each, = $6 total

Total fees for listing = about $8.40

New fee structure:

New listing fee = $2.00 (oh boy, huge savings!)
current final value fee = .50c/each, $10 total

Total under new structure = $12



That's about 30% more for sellers of small items like myself. Ok, so a snowboard wax company isn't crucial to eBay's business, but the sellers of CDs, DVDs, iPod cases, video games, and all other knickknacks under $25 are. (Above $25, the fees don't change significantly.)

Considering Fulfillment, Amazon's excellent, easy-to-use supply chain, coupled with fees at eBay that will squeeze profit margins, eBay is dangerously close to completely alienating high-volume small-item sellers that are crucial to its success.

eBay, as a corporation, has one great thing going for it: PayPal. There's still no serious competitor, and more traditional merchants (airlines, hotels, etc.) are accepting it. Also, I read an article about six months ago that more immigrants are sending remittances through PayPal - its instant and easy.

Revenue from items sold through Amazon's site is accumulated in an account and then transfered into a linked bank account. Since Amazon is a household name, they have no need for the trust, security, and ease of PayPal that has made it successful with other merchants.

So, logically, I think Amazon is making advances while eBay may be making a huge mistake. But when it comes to investing, eBay sports a 15 forward P/E while Amazon's ratio is still bloated at 35. But as Amazon expands overseas and steals domestic business, eBay may be forced to reevaluate its structure if it wants to remain a premier internet marketplace.


P.S. If you ski or snowboard, give Whacks Wax a try.



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