Buyers Love eBay Where Sellers Prefer Amazon

Edgar is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Fierce Tablet Market Competition

Amazon (NASDAQ: AMZN) boggles analysts whether to be treated as a retailer or a tech company.  After all it decided to aggressively enter the tablet market by introducing the latest 4G LTE Kindle Fire, competing head to head with Apple's (NASDAQ: AAPL) iPad 3 and Google's (NASDAQ: GOOG) Nexus 7.  But the competition is expected to grow fiercer as Research In Motion (NASDAQ: BBRY), the maker of Blackberry10 plans to tap into the tablet space itself with its BlackBerry PlayBook.  The tablet will boast itself in true multitasking capabilities, two cameras with HD video recording, a longer lasting battery life than its competitors and weighing less than a pound. 

We all know that when it comes to a slick design and color range, Apple definitely trumps its competitors, but its 7 inch iPad Mini that is set to be released around the holidays is a bit pricier at $350 than its competitors. This in turn may result in lackluster sales, specifically if Google decides to peg its Nexus 7 at $99, which might force the cost conscious consumer to reconsider.  After all,  Amazon's Kindle Fire HD and Google's Nexus 7 feature a better screen ratio and resolution than the former.  Both tablets feature  216 pixel per inch screens and an HD video quality of 1280x720 resolution for wide-screen HD viewing, but iPad Mini will fall short in this arena. 

Progress of Amazon

But I want to shift the focus of this article more on why consumers choose Amazon over eBay or vice versa, rather than diving into gadget space and Amazon's new tech buddy competitors.   I was first exposed to Amazon in college as my buddies loved to sell their text books and other items on the website fairly easy and in less time placing an ad.  Now this giant $117 billion online retailer sells a broad range of items from books to consumer electronics, to home and garden products. Since being introduced back in 1995 as the Earth's Biggest Bookstore, Amazon had aggressively expanded into a new range of items: shoes, jewelry, computers, digital books, cloud storage, movies, games, toys, health and beauty, even auto accessories.  

The company boasts an unlimited online shelf space and may offer its customers a vast selection of products through a search and retrieval interface.  It personalizes shopping by recommending items which, mainly based on previous purchases, are likely to interest a particular customer.  Some of its features also include customer reviews, manufacturer product information, secure payment systems, customer wish lists and so forth.  

eBay Vs. Amazon

eBay (NASDAQ: EBAY) focuses on more acquisitions to drive its growth.  Paypal was one of the best strategic moves that the company had made, which dramatically increased user experience globally.  In December of last year, PayPal had already recorded a whopping 106.3 million active registered accounts.  Bill Me Later, PayPal, StubHub, and Shopping.com all played a key role in creating an accelerated networking effect for eBay, where user experience was enhanced even when it came to customer service. 

Similar to eBay's marketplace business model, Amazon collects its fixed fees and sales commissions from each item sold.  In addition to being the seller of record for a broad range of new products, the company allows other individuals and businesses to sell new or used collectible items on its site through its merchant Amazon Marketplace programs.

While eBay sellers have absolutely no problem learning about their buying customers through a medium of e-mail correspondence, Amazon's buyers and their intentions remain to be somewhat of a mystery.  As far as selling prices are concerned, Amazon delivers pricing power for its sellers as its shoppers tend to purchase higher average selling price products.  One aspect that cannot be overlooked about Amazon's business is its cap-ex.  On technology and content alone, the company had spent approximately $2 billion in 2011 to make sure that the barriers do exist for new entrants.  However, online marketplaces are not the only competing forces for Amazon, the company is continuously facing fierce competition from brick and mortar retailers as well. 

Foolish Conclusion

There are numerous potential risks that are inherent in the company, which include the possibility of shoppers switching to lower cost retailers or search engines that are more simplified and do a better job at comparison shopping.  Again, a prime example here is its main rival eBay that leads the global online marketplace by allowing its users to compete globally.  While this creates a difficult selling environment for someone in U.S. who tries to compete with someone in Asia, Amazon benefits in this regard when sellers want to yield more buck per unit sold. 

The business development teams of Amazon also make sure that its listing process remains to be a breeze, compared to eBay's complex screening process of making a variety of choices, setting policies, writing descriptions, pictures, which ultimately consumes a lot of time and effort.  The time and effort is completely disregarded when an impulsive buyer keeps checking to see if he outbid his/her rival.  This tug-of-war between the two retailers is clearly depicted in the sellers' preference of Amazon's pricing strategy versus buyers' addiction to get a low bid on Ebay.


edgarambart30 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Amazon.com, and Google. Motley Fool newsletter services recommend Amazon.com, Apple, eBay, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

blog comments powered by Disqus

Compare Brokers

Fool Disclosure