eBay vs. Amazon: HeavyWeight Battle of e-Commerce Giants
Written by Pablo Palatnik on October 14, 2008
Two of the largest online e-commerce companies in the world are now going head to head as the steaks grow more competitive in this financial climate. Before, the “competition” between these two giants was not as prominent as their business models were quite different. eBay was mostly based of the auction business model and Amazon has always been the fixed price model.
Ironically, these two companies are on a collision course as the New York Times has a great in-depth article on this topic which I will take a few quotes from. Amazon is now taking on sellers, people like you and I to sell our products on their website and eBay is now changing their business model to a fixed price platform, along with their auction model as well.
As Amazon takes more of an eBay approach in their business model, one thing that can be said that is very different is that eBay let the marketplace take hold of their business where Amazon had a much more hands on approach in the direction where they took the company with one of the biggest markets they got their hands on, the digital market, which holds the sale of MP3s, releasing the Kindle which is an electronic book reader, etc.
A great quote from the NYTs article: “EBay could have closed the door to Amazon back when Amazon was mostly just a platform to sell books and music,” said Scott Devitt, an analyst at Stifel, Nicolaus & Company, the investment bank. “But what eBay did in those days was to take a very hands-off approach and let the marketplace control itself. And that ended up being the downfall of the business relative to others that have succeeded.”
eBay stood still in the marketplace for a long time building around the auction model. Not too long ago, eBay launched eBay Express which is a lot like Amazon where you can buy things at a fixed price and that would mean it would get shipped faster to you which buyers may want to buy that instead of an auction product, but what happens? Not only are you now offending eBayer’s who only sell using the auction model, but eBay makes the most money on auctions than fixed price products.
While comparing listing fees, instead of listing them because they have different pricing models, I will place the links here for you to compare:
eBay Listing Fees
Amazon Listing Fees
Amazon has gone a step further to serve its sellers by launching Amazon fulfillment which allows sellers (I believe high volume sellers) to hold all their inventory in Amazon wharehouses and when an order comes in, Amazon will actually fulfill your product. Now, not only are they serving the seller, they are also giving the seller more credibility and building more buyer trust by doing that.
eBay vs. Amazon Website Traffic:
Financials:
eBay:
(In Millions of USD)
Income Statement Quarterly
(Jun ‘08)
Total Revenue 2,195.66
Gross Profit 1,633.56
Operating Income 545.37
Net Income 460.35
Amazon:
(In Millions of USD)
Income Statement Quarterly
(Jun ‘08)
Total Revenue 4,063.00
Gross Profit 967.00
Operating Income 217.00
Net Income 158.00
As both companies will become each other biggest competitors, I think eBay has a long road ahead of them as Amazon seems to be in the right path.
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4 Responses to “eBay vs. Amazon: HeavyWeight Battle of e-Commerce Giants”
My first impression:
I don’t know if it is a good thing they are competing in that same segment?
As you say eBay’s auction model is very profitable: maybe it’s better to focus on this since they have virtually no competition here?
By Sam on Oct 14, 2008
Hi Sam,
Well, you know what they say, competition in the market place is always very healthy so yes, I think its good that both companies are mixing models.
I think eBay as a brand will always be looked at as the largest Auction website unless Amazon makes a big push towards that market and it seems it could be in that path starting seller fees at .10 cents for auctions but Im not sure what the final fees are. Look at Overstock, I didnt mention it once in the article but its a mix between Amazon and eBay using both fixed price items and auction model.
So, yes, eBay does have compeition in the marketplace. There are a few other auction sites such as Bidz which focuses primarily in the jewelry niche and more auction niche sites may pop up.
eBay, from what I can remember, took off the 24 hr auction option for sellers which I think is a BIG mistake unless they put it back because one of the draw backs of the auction model and why it may be wise to also fall back on fixed price like Amazon has always done is people dont want to wait 7-30 days to win an item, unless its an auction for a one-of-a king painting, etc.
I think the next year will give us a much more clear picture of where both companies are heading.
By Pablo Palatnik on Oct 14, 2008
To Ebay ,
I and 25 of my friends have been using Ebay auction for past 5 to 8 years.
All are considering stopping use of Ebay Auction . Prices have fallen and continue to drop - We do not like using PAY Pal. Cost of Pay Pal has driven the cost to sell via Ebay Auction too high .
Looking for another site to sell.
Robert A. Frey
By Robert A. Frey on Dec 3, 2008
i also believe the Amazon market is going to far surpass eBay. i would put my horses on Amazon.
I’ve seen another interesting post that even showed that clearly by analyzing the stock market value, analysis opinion, and strategy differences:
http://www.blog.imonlinegroup.com/?p=37
By Arie Shpanya on Dec 21, 2008