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Can eBay Inc (EBAY) Drink Amazon.com, Inc. (AMZN)’s Milkshake?

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Last week, at eBay Inc (NASDAQ:EBAY)’s analyst day, CEO John Donahoe told analysts, “The turnaround is behind us, and we are now playing offense.” What does offense look like for eBay Inc (NASDAQ:EBAY)? With $67 billion of gross merchandise volume, or GMV, across its websites in 2012, it moves vastly more products than anyone does on the internet … except Amazon.com, Inc. (NASDAQ:AMZN), which sold approximately $100 billion in merchandise last year (when combining its own inventory with third-party sellers).

Amazon.com Inc (AMZN)

But eBay has big plans to grow the company over the next three years, and Amazon.com, Inc. (NASDAQ:AMZN), as the biggest name in e-commerce, is the company’s enemy number 1.

Hitting ‘em where it hurts

eBay Inc (NASDAQ:EBAY) and Amazon.com, Inc. (NASDAQ:AMZN) currently operate primarily in two separate mind-spaces. eBay Inc (NASDAQ:EBAY) dominates the market for second-hand goods, and is often the first place customers look to for used merchandise. Amazon.com, Inc. (NASDAQ:AMZN), on the other hand, is the first stop on the internet for brand-new products. While both companies also operate in the other’s forte, a distinct thought process goes through customer’s minds when they choose either website.

eBay Inc (NASDAQ:EBAY)’s offensive strategy involves encroaching on Amazon.com, Inc. (NASDAQ:AMZN)’s turf by attracting third-party sellers, and their unused products, to eBay’s marketplace. The company overhauled its seller fees last month in an attempt to undercut Amazon.com, Inc. (NASDAQ:AMZN)’s pricing and provide better transparency. Previously, seller fees lacked clarity, making it difficult for merchants to determine if it was more profitable to sell on eBay Inc (NASDAQ:EBAY) or Amazon.

This week, eBay started testing out a service that provides small business loans to sellers. This is just another move to level the playing field as Amazon started offering loans in 2011 with its Amazon Lending service. eBay is well positioned to provide loans to sellers, as its been doing so for buyers since it acquired Bill-Me-Later in 2008.

Interestingly, Amazon doesn’t seem threatened by eBay’s new strategy. In fact, the company decided to raise its third-party seller fees from an average of 7% to 12% across Europe.

Third-party sellers are one of the company’s biggest drivers of growth. Sellers on Amazon Marketplace accounted for 39% of total sales in the fourth quarter of last year, up from 36% of sales in the same period a year ago. It’s also an important profit center for the company, as Amazon keeps profit margins practically non-existent on its own inventory.

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