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Amazon stays the course

Customers remain loyal, despite public feud with suppliers

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NEW YORK -- Jeff Bezos is betting consumers are so hooked on's easy shopping and fast delivery they won't revolt, even as negotiations with suppliers make it harder to find some items on the site.

Amazon's chief executive officer is gambling on shoppers such as Paul Shi, 23, who signed up for the company's Prime fast-shipping service two years ago. Shi, a New York resident who buys products ranging from flip-flops to used books, said he's keeping his spending patterns the same, even as the company duels with Hachette Book Group and Walt Disney Co. over the terms of selling goods on the site.

"Do I think they can be less confrontational and work toward a better resolution? Sure, but at the end of the day, they're out to protect their bottom line, and it's just a negotiating tactic," Shi said. "I'm the consumer, and my job is to get the lowest price possible, even if it happens to be on Amazon."

Shi's actions illustrate why Bezos may have the upper hand as the Seattle-based company grapples with negative publicity from its disputes with media companies. Since May, Amazon's negotiations with Hachette over the cut of sales from e-books have spilled into the open, with the world's largest online retailer blocking some Hachette titles on the site. More recently, Amazon stopped pre-orders of Disney movies such as Captain America: The Winter Soldier in disc form.

Yet, even though some books and DVDs are now unavailable for pre-order on Amazon, the company's business has continued undented. Visitor traffic to the site was up almost seven per cent in June from a year earlier, third-party merchants' sales through Amazon's marketplace jumped more than 40 per cent in July and even book buyers aren't deterred, data compiled by Bloomberg reveals.

That's because Bezos over the years has locked in consumers with the Prime fast-shipping service, which gets a huge selection of items to people's doorsteps in less than two days. Customers also remain attracted to Amazon's low prices in general. All of that makes it easier for Bezos to retain his customer base -- and thus continue being tough on suppliers.

"At the end of the day, this is a company that has $100 billion in revenue," said Kerry Rice, an analyst at Needham & Co. "It might suffer some, but I think overall the effect will be negligible."

Brittany Turner, a spokeswoman at Amazon, declined to comment beyond a letter the company posted over the weekend. In the missive, Amazon appealed to readers to write to Hachette CEO Michael Pietsch with their thoughts on the dispute.

Amazon has been taking on vendors more publicly as it faces investor pressure to boost profits. The company's stock fell 9.7 per cent last month, the day after it reported its widest loss since 2012.

Amazon's entrenched position with consumers is evident as people keep visiting its website. Unique visitors in the U.S. to Amazon's site increased slightly more than half a percentage point to 159.6 million in June from May, when the disputes became public, ComScore reported. In total, visitor traffic to Amazon in June was up 6.9 per cent from the same month a year earlier, ComScore said.

Product orders on Amazon also remain strong, third-party sellers' sales show.

Transactions from third-party merchants who use Amazon's platform to sell their goods jumped 40.4 per cent in July from the year before, compared with June's 34.4 per cent and May's 28.1 per cent increases, say data from ChannelAdvisor, which helps e-commerce retailers access various distribution channels.

Even consumers who are aware of the Hachette spat, which prompted authors to run an ad in the New York Times in protest over the weekend, have stayed firm in their book-purchasing habits.


-- Bloomberg News

Republished from the Winnipeg Free Press print edition August 18, 2014 B7

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