Anyone who has closely watched eBay, the giant online auctioneer, knows that their sellers don’t need them as much as they once used to, mostly because of contextual and performance based advertising. A retailer looking to acquire customers doesn’t need big marketplaces, because Google Adwords (and other such tools) do a pretty good job of directing buyers their way. And cheaper!
And like the Bird Flu, this disease known as the bigmarketplaceinitis, is now spreading to Amazon.com. On Thursday, the Seattle-based e-tail giant lost another third-party vendor, Borders, which is going to try its hand at online retail on its own. Last year, Amazon.com lost another key vendor – Toys’R’Us.
The Ann Arbor, Mich.-based book retailer Borders won’t be the last of Amazon.com’s partners to fly the coop. The word on the street is that another one of their partners, one with cool and iconic television and billboard advertising has issued an RFP and is looking to go solo.
This is pretty disturbing news, because according to some analysts this third-party vendor arrangements carry high margins for Amazon.com. Not to mention lost revenues: Borders’ accounted for more than 2% of Amazon.com’s sales, according to Citigroup Internet analyst Mark Mahaney. In a note to his clients, Mahaney wrote:
The loss of one of Amazon’s largest ecommerce partners — with the implication that Amazon’s potential for signing up extensive third-party partnerships — which are generally high margin revenue streams — may be limited.
For now Amazon.com can brace some of these losses – it has dozens of partners – but over the longer term, the company will face an increasingly hostile future, one where more Adwords type, or even more brutally efficient systems such as performance-based advertising networks diminish the role of big marketplaces.