May 30, 2000
Is zShops Really the Promised Land for Small E-tailers? There's no such thing as a free lunch according to this opinion article by Jeffrey Cohen

Since Amazon.com announced its new zShops program, startup e-tailers are beginning to question whether or not they need to spend money with a development firm or just log on to amazon, click a few templates, and jump into the e-commerce with little or no cost.

In what some industry observers consider to be a bold move, Amazon.com opened their popular Web site to any manufacturer or retailer -- including competitors -- who has something they want to sell. For just $9.99 (US$) per month, plus 1.25 percent to 5 percent of revenues, an e-tailer can offer as many as 3,000 of their products to Amazon.com's 12 million customers. In addition, for a 60 cent fee and a 4.75 percent cut of sales, Amazon.com will enable small e-tailers and individual sellers on its auction site to accept credit cards.

Amazon founder Jeffrey P. Bezos is touting this program as proof that the company is committed to letting its customers shop whenever they want for whatever they want and wherever they want.

Hyped Response
So far, the response among small e-tailers could be described as escalating exuberance. Since Amazon.com's announcement, many press releases have come across my desk from small online merchants with the announcement that they have been selected as an Amazon.com zShops merchant.

I received announcements for a diverse group of e-tailers, including a bargain bookseller, a vacation time-sharing company and an online golf pro shop. However, unless I've missed something, Amazon.com isn't going to turn down any reputable e-tailer whose monthly fee check clears the bank. It seems to me that some online merchants are trying to get a free ride on zShops' initial hype.

These newcomers join an estimated 500,000 products and services, including 19 million inventory items, that are already being pitched from the virtual mall. Unfortunately, I think that the sheer volume of mom-and-pop online merchants who are rushing to be part of Amazon.com's success story will turn zShops into one big strip mall or fleamarket. What Amazon.com is doing with zShops reminds me a little of what some realtors in Arizona and Nevada do when they sell desert land to tourists at a low price. "It might be a desert now," they tell the prospective buyers, "but someday it will be developed."

The same can be said, I believe, about zShops. Someday they may have traffic, but not anytime soon. And if small e-tailers begin to promote their sites by buying advertising and working 12 hours a day, they'll find themselves in business with a silent partner whose cut of their profits escalates in tandem with their hard work.

No Free Lunch
I'm ashamed to admit it, but I was many years on my own before I realized there was no such thing as a free lunch. I could never seem to turn one down -- especially from a silver-tongued salesperson who promised not to talk business. I estimate that it has cost me about $1,000 for every free lunch that I've accepted over the years. Thankfully, it eventually hit me like a sucker punch that there wasn't such a thing.

I'm sad to say that all of the e-tailers who think the zShops train is a free ticket to the land of milk and honey are going to learn the same lesson. After all, Amazon.com has yet to show a profit after four years of business.