Posted on: Tuesday, February 25, 2003

Amazon.com adds buy-back feature

By David Colker
Los Angeles Times

Laura Pegoraro was looking forward to reading "The Corrections," Jonathan Franzen's award-winning novel about an ultra-dysfunctional family, when she bought it from Amazon.com Inc. in October 2001. Oprah Winfrey had selected it for her book club, and a month later it won the National Book Award. But Pegoraro hated it. "I couldn't wait to get rid of it," she said.

Amazon was only too happy to help. The Internet retailer urged her to sell it — on its Web site.

The company wasn't acting out of any sense of charity. When a used item is sold on Amazon, the company gets a commission.

"It's very clever," said Ken Cassar, an analyst at Jupiter Research. "Amazon makes a profit on the item when they sell it to you the first time. Then they pick up a fee when you sell it used."

That second sale is particularly sweet for Amazon because the company only provides the electronic platform for the transaction to take place. The deal is strictly between seller and buyer. Amazon incurs neither storage nor shipping costs but collects a 15 percent commission.

Sound familiar?

"Looks a lot like eBay to me," said Carrie Johnson, a retail analyst with Forrester Research.

EBay Inc. became enormously successful by providing an online platform for auctions between private parties — mostly for used goods — and making money through commissions.

Amazon officials insist that in planning its Sell Your Past Purchases program, eBay's name never came up. But eBay Chief Executive Meg Whitman believes that her company was at least an inspiration. "I think it is certainly a reflection of how well we have done," she said.

Similarly, eBay has followed in Amazon's footsteps to broaden its appeal. In 2000, eBay introduced the Buy It Now option that allows customers to bypass the auction process by paying a fixed amount. EBay also has encouraged its sellers to put new goods up for sale.