Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

The E-Commerce War Between eBay Inc (EBAY) and, Inc. (AMZN) Heats Up

In order to help drive more sellers on to its platform, Valuentum’s Best Ideas Newsletter holding eBay Inc (NASDAQ:EBAY)announced new, less complicated fee structures. The firm already charged lower fees than, Inc. (NASDAQ:AMZN), but the new structure gives greater transparency to sellers. Instead of the previous 10%+ take-rates, eBay will now have more basic fees ranging from 4%-10% depending on the seller’s size and product mix.

eBay Earnings Report

The move is very positive, in my view, as I think it can help drive a stronger network of fixed price sellers to eBay Inc (NASDAQ:EBAY). Though it has been associated with auctions since its inception, eBay is in the process of becoming a destination for buyers of everything, much like, Inc. (NASDAQ:AMZN) has done successfully over the past several years. While Amazon may look slightly more attractive in the near-term because more buyers are on the site, I believe the cost savings at eBay Inc (NASDAQ:EBAY) could help drive sellers to the eBay marketplace.

As much as I love eBay and the PayPal payment processing, PayPal presents an obstacle for eBay to make its seller network as comprehensive as, Inc. (NASDAQ:AMZN)’s seller network. PayPal, while a great service, constricts eBay’s payment functionality. Those who do not have enough cash in their PayPal accounts or who simply wish to pay with a credit card for whatever reason are not given the option. A consumer can pay for an item on eBay through PayPal with a credit card—but only if they do not have ample cash to cover the payment. This type of restrictive ecosystem is wonderful for driving profitability, but it could potentially be a hurdle for eBay Inc (NASDAQ:EBAY)’s long-term marketplace growth.

Fortunately, I believe eBay can easily remedy this situation. There are three options to fixing this, and one is to start issuing credit via PayPal. This would make the service similar to American Express Company (NYSE:AXP) or Discover Financial Services (NYSE:DFS) rather than its Visa Inc (NYSE:V) -like toll collector model. PayPal already executes this function via Bill Me Later, but the program could be greatly expanded or rebranded to a PayPal name. However, I’m not a huge fan of this idea since I would rather the company not take on credit risk.

The second option to address the situation is to allow consumers to pay via PayPal with a credit card directly. I assume eBay doesn’t allow this because it helps PayPal’s competitors and likely lowers the fees PayPal earns, but with competing services like coming into existence, I think PayPal should focus on making its service as compelling as possible. I see this as the lowest cost option for PayPal.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.