Amazon.com, the Internet's leading retailer, took another step toward creating an online supermall yesterday by inviting anyone to sell almost anything from its Web site for $9.99 a month and a slice of each transaction.
The concept is not so different from services already available at other major Web sites such as Yahoo and Lycos, but Amazon is charging lower merchant fees. The company spent nearly two years designing its new virtual mall--called zShops--to appear like an extension of its existing Internet book and music store and give shoppers a more consistent way to buy from many merchants.
"What's different about this service is the selection is all organized, and there is a uniform way of buying everything," Amazon chief executive Jeff Bezos said in a telephone interview. "We have asked our customers what they want, and one thing people said is they want one single place they can come to get the biggest selection on Earth."
Amazon's shares jumped 22 percent to close at $80.75 on the news, largely because analysts say the supermall business has higher profit margins than Amazon's direct sales operation. With zShops, Amazon has no inventory or shipping costs.
Skeptics said Amazon has yet to prove it can extend its expertise in selling books and music to 12 million customers into new retailing categories.
"Amazon insists that the people who come to buy books and CDs will automatically be interested in buying other things," said David Simons, managing director of Digital Video Investments. "So far Amazon hasn't really demonstrated it has become synonymous with shopping in a broader sense."
Amazon visitors will see a new "zShops" label across the top of all pages that will take them to a directory organized by product categories. Merchants can pay extra to have their names and logos more prominently featured on the directory pages. Shoppers also can do a simultaneous search of merchandise sold by Amazon and zShops.
ZShops is similar to what Yahoo acquired in June 1998 when it bought Viaweb Inc., a Web storefront company that had 1,000 paying merchants. Yahoo renamed the service "Yahoo Shops" and has since signed up 6,000 merchants. On Yahoo, merchants pay $100 a month to list up to 100 items, or $300 monthly for 1,000 items. There are additional fees for credit-card processing and high-volume sales.
Amazon charges everyone the same monthly listing fee of $9.99 for up to 3,000 items. Merchants who opt to use Amazon's "one-click" checkout system pay an additional 60 cents per sale plus 4.75 percent of the price. The checkout system allows users to store their billing and shipping information online so they don't have to reenter it each time.
To jump-start zShops, Amazon invited an undisclosed number of merchants to list a total of 500,000 items, including aquarium ornaments, vacation packages and Pepto-Bismol.
Amazon also will let merchants cross-link their items with specific book and music titles sold directly by Amazon. For example, someone selling Middle Eastern spices could link the merchandise to related cookbooks, which means a link to the store would pop up whenever shoppers searched and found those books.
John Briggs, Yahoo's director of e-commerce, said Yahoo Shops does more general cross-linking of its store areas with related categories in its Web guide. "We have so many merchants that you can't cross-link them all individually," Briggs said.
Participating merchants at Amazon and Yahoo include individuals, mom-and-pop operations and traditional retailers. AtYourOffice.com, an online office-supply store based in Arlington, has signed up to sell on both sites.
"Unless you have lots and lots of money, you have to use guerrilla marketing tactics on the Internet to keep your customer acquisition costs low," said chief executive and founder Tom Graham, who listed 3,000 pens for sale on Amazon. "This is a good model for doing that."
Amazon started four years ago as the Internet's first big bookseller and has since expanded into direct sales of music, videos, toys and electronics. It also has invested in other "e-tailing" operations, including Drugstore.com and Pets.com, and a few months ago rolled out a person-to-person auction service that competes with eBay.
Amazon, Yahoo and America Online are still working on the Internet mall concept that fell into disfavor three years ago when several large Web malls failed to attract a critical mass of merchants and shoppers. Instead, niche shopping sites such as eToys.com grew more popular. Now industry observers say the largest Web sites have an advantage because online shoppers are looking for wide selection and fast, easy transactions.
Amazon built is reputation in part with a relentless focus on service--speedy deliveries, prompt returns, quick response to missing merchandise. Some analysts wondered how Amazon can maintain its reputation once so many merchants are under its virtual roof.
"It is a step back from the model of controlling everything, which has been the hallmark of Amazon," said Simons.
But Bezos noted that Amazon is guaranteeing most sales up to $1,000. He also said customers are smart enough to know the difference between their direct purchases from Amazon and its partners.
"The vast majority of these merchants will be small speciality retailers or micro-manufacturers," Bezos said. "But just because they are small doesn't mean they don't care about their customers."