Amazon Ponies Up Affiliate Fees for Used Products

"Our used offerings have become incredibly popular with buyers," Amazon spokesperson Patty Smith told the E-Commerce Times. "We wanted to allow associate sites to earn referral fees on this new feature."

Previously, Amazon paid commissions only on sales of new goods, on a sliding scale that ranged from 5 to 15 percent, based on the types of items sold.

Visitors to an Amazon affiliate site (a site that links to products for sale on Amazon) fetch the site owner a 15 percent commission on every new item sold at a discounted price. A 5 percent fee is paid for non-discounted books and other products such as CDs, electronics or toys.

Despite the changes in the commission structure, payments will still be issued quarterly, according to the company.

Affiliate Overhyped?

Affiliate programs allow Web site owners to earn money by displaying links that send visitors to a merchant's site. Every click-through that leads to a sale puts money in the Web site owner’s pocket.

"Affiliate programs were a bit overhyped in the late '90s, but they can still be an effective sales channel," Yankee Group analyst Paul Ritter told the E-Commerce Times, "and many companies are obviously still using the affiliate marketing model."

Amazon was a pioneer of affiliate programs, also known as viral marketing. The company launched its effort in 1996, and now boasts more than 700,000 members, according to Smith. EBay (Nasdaq: EBAY) and CDNow also run popular affiliate marketing programs.

Solid Strategy

Seattle, Washington-based Amazon could reap big dividends by paying a small commission on used items, according to Ritter. If past experience is any indicator, the financial incentive will encourage affiliates to sell used products more aggressively and should have a measurable impact on Amazon's net income.

"Amazon does not have to inventory or ship these used items," said Ritter. "From that standpoint, it is a very wise strategy because it can really boost sales at a very low cost by leveraging the thousands of affiliates they have all over the world."

Protecting the Brand

Getting a cut of the sales of used items should make affiliates happy, but it probably will not sit too well with booksellers and publishers, many of which are already complaining about Amazon's practice of selling used copies of in-print books on new-book listing pages. They contend that this practice is undercutting sales of new books.

Ritter also questioned the wisdom behind Amazon's strategy, albeit for different reasons.

A key factor in Amazon's growth historically has been its focus on serving its customers. Offering used books sold by third-party vendors may generate revenue, but it also may diminish the e-tailer's brand.

"This strategy makes Amazon more of a garage sale-type seller," Ritter said. "In the grand scheme of things, I don't think this serves their purposes all that well, other than generating additional revenue at very little cost."

Low-cost revenue generation is an area in which Amazon has done very well. The company's zShops division specializes in offering used and refurbished items from third-party sellers and makes up about 23 percent of U.S. orders, according to the company.