Amazon's Forced 'Payments' a New Net Auction Trend?

This week, Amazon announced that it is going to begin requiring its users to offer the company's proprietary online payment service when auctioning on the site. The move has sparked outrage among some in the Net auction community, but no doubt eBay and Yahoo! will be watching to see if the rule pays off successfully for Amazon.

Larry Jordan, vice president of marketing for AuctionWatch.com, told the E-Commerce Times on Thursday that Amazon's move makes sense from a business perspective, because it allows the company to create a simple way for buyers to pay for all their auction purchases.

"It's a good move for buyers at Amazon," Jordan said.

On the other hand, Jordan noted that "definitely some sellers are unhappy with the decision."

Optional or Not?

Previously, it was optional for users to offer each other Amazon Payments, a proprietary system that allows participants to use credit or debit cards to pay for auction purchases.

One big reason that some Amazon customers prefer using Amazon Payments is that, according to Amazon, purchases made using the service are protected by Amazon for up to US$2,500 in case the item does not arrive as expected.

Jordan and Morningstar.com analyst David Kathman said that it would hurt the Seattle, Washington-based Web superstore if it chose to make Amazon Payments the only acceptable form of payment. However, Amazon did stress that sellers will still be able to offer alternative payment methods, as long as they offer Amazon Payments too.

In fact, although Amazon is requiring that all customers offer Amazon Payments as an option, the company has also told customers that "because Amazon.com Payments is limited to $2,500 per transaction, items you sell above that amount will require an alternate payment method."

On the Outside

Another issue raised by Amazon's decision is that the move effectively bars sellers living outside the United States from selling through Amazon. In order to use the service, sellers must have a U.S. address and bank account.

"I just signed up for a merchant account for $40.00 and now they tell me I can't sell anything after the 17th," wrote one Canadian Amazon Auction patron on an AuctionWatch message board. "I can't believe it. Regardless of how low my sales were, they were much higher than eBay on certain books! I am really disappointed!"

Amazon said it is aware of the consternation among non-U.S. based sellers.

"Right now there aren't any alternatives, but this is something we are looking into," Amazon spokesperson Lizzie Allen told the E-Commerce Times.

Fees, If You Please

Amazon notified its auction users via e-mail earlier this month that Amazon Payments will be a required offering. Allen said the company was still getting the word out and that it had not yet set a specific date for the change to be implemented.

Meanwhile, Amazon also began charging closing fees to all customers this month. Previously, customers using Amazon Payments were exempt from paying the fees, which start at 5 percent of the purchase price for winning bids under $25. Kathman and Jordan agreed that the fees were one way that Amazon could boost its revenue and improve its financial status.

Yahoo! and eBay have been thinking the same way. Earlier this month, Yahoo! announced that beginning on January 10th it would charge users a listing fee of 20 cents to $2.25. Fees were to be assessed on a sliding scale, based on the starting and reserve prices of the items.

eBay also announced earlier in the month that it was increasing its listing fees, in some cases by as much as 65 percent.

Consumer Relations

Like Yahoo and eBay, Amazon continues to occasionally tread on thin ice with its user community. In November, writers and publishers expressed outrage over a change that made it easier for Web shoppers to choose used books over new books on Amazon.

Although Amazon has been selling used books through its zShops and auctions for some time, a site redesign placed used books and new books side by side for the first time.

Cissy Hartley, the founder of Writerspace.com, told the E-Commerce Times at the time that writers were expressing "various degrees of outrage and annoyance" over the prominence that Amazon was giving to used book listings on the Web site. She also said that there had been some reports of books making their way to the Amazon Marketplace before the official release date.