Local stores finding ’net sales a necessary “evil” to doing business
February 27, 2006
Valerie Miller, Las Vegas Business Press — View Original Article
As Amazon.com grabs headlines about its acrimonious legal battle with Toys 'R' Us, small retailers in the valley are divided on the Internet site's impact on their own businesses. The big boys' messy dispute is far from the mind of Rich Rosen, owner of Wax Trax Records, which has so far resisted the online marketplace craze.
Tending to his 8-year-old store on Decatur Boulevard, the longtime collector says he doesn't have to wait long for people to walk through his brick-and-mortar operation searching for rarities among his rows of vinyl. The element of surprise at a great find is something that can never be duplicated online, Rosen maintained.
"I like people coming in and saying 'ooh' and 'aah,'" the Wax Trax owner said, noting his estimated half-million albums and 45s. He does sell on eBay, which accounts for about 5 percent of his business. "I'll increase that over time," Rosen conceded to the site's popularity.
Velvet Underground Comics owner Steven Riddle is an absolute purist. He refuses to sell his comics and other memorabilia online, despite citing comics as one of the ten best investments for collectors. It's not all a matter of tradition for the 12-year business owner, however. In his line of work, it's risky to buy and sell online.
"I'm not big on Amazon," Riddle said. "You really can't see what you are looking at." For example, pages can be dog-eared or missing. While Amazon offers buyers a money-back guarantee, eBay users are left to haggle over refunds.
That said, Riddle acknowledged it's a revenue source lost, adding that by using Amazon and the like, "I could make a lot more money than I make now."
Plenty of Online Choices
People like Riddle are an iconoclast as more businesses are using Cyberspace. Besides Amazon and eBay, there are niche sites such as gemm.com (for music and music-related products), abe.com (the America Book Exchange), alibris.com (also for books) and eBay's spawn, half.com.
Products on Amazon can be listed for as little as 99 cents, according to Amazon spokesperson Drew Herdener. After a product is sold, Amazon takes 15 percent. Unlimited listings run $39.99 a month. Those are typical price ranges for mom-and-pop retailers.
Conglomerates like Target and Toys 'R' Us strike their own deals with the Internet commerce site. Toys had a profit-sharing deal with Amazon before suing the site for breach of contract. The retailer claimed Amazon's selling of competitors' toys and baby products -- side by side with Toys' -- violated the deal it had struck with the Internet giant.
Others contend a little competition online is healthy. The Book Warehouse, which is scheduled for closing because of corporate downsizing, does a lot of deals on Amazon but it isn't bothered by the parade of good reads listed next to it, said its Las Vegas Premium Outlet Mall store's manager, Brenda Gerber. "It doesn't bother us at all. We give away bookmarks with the store's name on it. We encourage each other. Are we happy with Amazon? Yes. It helps."
Adds to Bottom Lines
Locals can still browse at Michael's Books, DVDs & CDs and they can buy the store's merchandise online, too. Proprietor and namesake Michael Clark isn't crazy about Amazon, but he doesn't have any plans to drop it, either, because it accounts for 20 percent of his business.
"It is the lesser evil," Clark contended of Amazon. "The difference between eBay and Amazon is on eBay, the bidders are bidding against each other to drive the price up. On Amazon, the sellers bid against each other to drive the price down." That can be a problem in the low-margin business of book selling, but Amazon cut its teeth as a bookseller. People visit the site for book deals, one of the reasons why Clark lists approximately 700 titles on the site.
Clark, however, does have his gripes with Amazon. First and foremost, it's the site's grabbing of a good portion of what it calls "shipping and handling" charges. "That p***es me off about Amazon," he said. "They charge the customer about $3.85 (for shipping) and they only give us $2.35 of that $3.85."
The work and expense of actually shipping the package falls on the seller. "It takes us two hours a day, and at (a wage of) $9 an hour, that's an extra $18 to sell the book," the owner said.
Shipping Costs
Amazon's Herdener responded that the shipping varies depending on the type of item. A book would cost about $3.49 to ship, out of which Amazon would keep $1.26. "The seller of the book keeps $2.26 to cover their costs to ship the book to the customer," he explained. "If it costs them less than that -- and in a lot of cases it does -- then they keep what's left over."
Products sold from the Amazon warehouse are shipped by the Internet giant itself; third-party sellers on the site ship their own.
About a third of Amazon's profits come from revenues paid by third-party retailers with established shops on Amazon. The company did not have Nevada business numbers available, but more than a million merchants nationwide sell on Amazon.
Navigating the ins and outs of selling on Amazon has become a business in itself for one Portland, Ore.-based company. Monsoon has business clients in Oregon and California using its Amazon-compatible pricing and listing software and hopes to add Nevada to that list. Monsoon designed the product especially for the small- to medium-sized businesses to allow ease of use when selling on Amazon, explained Monsoon CEO Kahth Gopalpur. "We make sure sellers get real-time pricing on their products," he said.
Businesses like Las Vegas' Albion Book Co. say Amazon is expensive enough as it is. The company opted for ABE, although it only does a small portion of its sales online, according to store manager Daisy St. Clair. One advantage of ABE is that is allows sellers to make up their own return. "With Amazon, the customer can send it back in 30 days or so," the Albion manager explained. "You can do a lot in 30 days with a book. You can read it and send it back."
Amazon, eBay and their ilk can be friend or foe to small businesses. Michaels sees a lot of his merchandise resold on the Internet by bargain-hunting customers, and it doesn't sit very well with him. Riddle is not hiding his disdain at what the Internet has meant to his life's work. Fewer classic Spiderman, Captain America and X Men comics come his way. The drop off in comic traders and declining sales are attributed to online selling options. "Everybody and their brother is selling their stuff on eBay. I could sit at my house all day and sell," he lamented. "It hasn't helped us at all. Nobody even brings us anything anymore."
