Amazon Starts Charm Offensive as Merchants Defect to Wal-Mart

E-commerce giant can't afford to alienate sellers as it expands globally

Why Amazon Is Out to Charm Online Merchants

For years, Amazon.com Inc. was the go-to place for online merchants.

Increasingly, however, the e-commerce behemoth has competition for the hearts and minds of millions of mom and pops. Wal-Mart Stores Inc. is successfully courting many of the same merchants. Alibaba Group Holding Ltd.'s Jack Ma was in Detroit last week dangling millions of Chinese web shoppers before U.S. businesses. In July, EBay Inc. will host its annual seller celebration in Las Vegas.

On Wednesday Amazon is holding its own meet-and-greet with merchants in New York, where 1,500 invitees will have an opportunity to network, grab face-time with Amazon executives and attend seminars on how best to reach potential customers around the globe. It's the first such event since the company opened for business more than 21 years ago. 

"They need to get sellers to subscribe to the Amazon religion," says Chad Rubin, co-founder of Skubana, which sells e-commerce management software. "Amazon has gotten so large and so anonymous for sellers, this event helps make them more personal. It's trying to show sellers it cares about them."

Third-party merchants are responsible for about half of all the merchandise sold on Amazon. After years of complaining that their host is too quick to kick them off for dubious infractions, they're starting to move some of their business elsewhere. Wal-Mart is benefiting the most. Once an e-commerce also-ran, Wal-Mart has become a competitive threat since acquiring startup Jet.com last year and putting its co-founder, Marc Lore, in charge.  

For merchants, Wal-Mart today is what Amazon was a decade ago: a vast frontier with room to grow. Amazon, by contrast, is so crowded with products and sellers it has become difficult to stand out, forcing merchants to sacrifice some of their profits on advertising. 

Amazon can ill afford to alienate the more than 2 million merchants hawking goods on its site. A robust marketplace is key to Amazon's success: merchants competing to sell the same things keep prices low, and those constantly introducing new products keep inventory fresh. That's helped Amazon attract more than 300 million shoppers around the world.

Merchants relish access to those consumers yet crave more attention and help from Amazon, which makes it easy for them to post products online but sacrificed the personal touch. (Merchants complain constantly about how hard it is to speak with a human Amazonian.)

The company is also keen to accelerate the international expansion of its logistics service. Started in 2007, Fulfillment by Amazon gives merchants access to the company's hugely popular two-day shipping offering and other round-the-clock services. Going forward, Amazon wants to help connect merchants and shoppers across borders while eliminating middlemen along the way. To persuade sellers to think globally, Amazon offers to handle the currency exchanges and language translation.

The New York event is basically a warm-and-fuzzy sales pitch: stick with Amazon and we'll show you how to access billions of shoppers, including in hard-to-crack markets like China and Brazil. The gathering was modeled after Amazon Web Services' re:Invent conference that promotes Amazon's cloud-computing business. Re:Invent drew 6,000 attendees its first year in 2012 and grew to 32,000 last year. Amazon wants the new merchant event to become a similar phenomenon. 

"We know the seller appreciates a chance to meet with a face of Amazon and get answers to questions," says Senior Vice President Tom Taylor, who launched Fulfillment by Amazon. "We want to make sure this event is valuable for the seller."

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