Amazon offers cheap shop space

Amazon's zShops will let consumers set up an inexpensive shop through the retailing powerhouse. And it puts Amazon in competition with Yahoo! and AOL.

Continuing its metamorphosis from online bookseller to retailing giant, Amazon.com announced Wednesday a program that will allow small businesses and even consumers to inexpensively set up shops on its high-traffic Web site.

The zShops program takes Amazon a step closer to a becoming a general-purpose Web site, offering tools and services, not just products, to consumers. zShops will put Amazon in competition with portal sites including Yahoo! and America Online, in addition to its current head-to-head battles with eBay and Barnesandnoble.com.

Amazon will charge a $9.99 (£6.20) monthly fee for Web space, and a transaction-based fee of between one percent and five percent for items sold through the site. Users will be able to take advantage of Amazon features such as one-click shopping and transaction processing. "Amazon.com's heart and soul is all about making shopping better for customers," CEO Jeff Bezos said in a release. "This is a win for customers who get bigger selection, a win for sellers who can now reach more than 12 million customers hassle-free, and a win for Amazon.com because we're now an even better shopping destination. This is all about finding what you want and saving time and money."

While Amazon will handle the transactions, the shops will be responsible for shipping products and handling customer service. The low fees and the fact that Amazon will process the transactions would seem to indicate that the program is focused on individuals and home businesses or other small businesses. Yahoo! Stores, for instance, charges $100 per month for a 50-item store, although it does not charge a transaction fee.

"The intent is to be able to position Amazon to consumers as the place you go on the Web to buy anything -- not just music videos and books," said Ken Cassar, analyst at Jupiter Communications in New York. Cassar said Amazon has also revived the "shopping bot" technology it acquired with the purchase of Junglee, which helps consumers look for products elsewhere on the Web. When a consumer types in a search request for the Dave Matthews band, for instance, he or she would see CDs from Amazon's store, and fan merchandise for sale in Amazon auctions or in a zShop. The customer could also be referred off of the Amazon site to a page selling concert tickets.

Small businesses may see zShops as a natural evolution from Amazon's auction business, said analyst Rebecca Nidositko at Yankee Group. "There's a level of slowness that can be part of an auction. Small business might be looking for a bigger platform and a larger reach to extend their platform."

Amazon might also be able to sell marketing services to zShop proprietors, she said. "Probably after a while (site owners) will want to make it a little more customised and have some way to provide customer service." In fact, Yahoo! and other similar services offer more extensive services than the Amazon product, analysts said.

While the Web-shopping technology will certainly be helpful to consumers, it could also put Amazon at risk of driving customers away from the site, Cassar said. And the fact that Amazon will be responsible for all transactions puts it at risk of fraud from the zShop owners as well. Amazon has agreed to reimburse consumers who have problems with zShop merchants, under certain conditions.

The new service is expected to begin Thursday.

Amazon stock gained 14 percent in mid-morning trading, up 9 points to $75 3/16.

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