Guest Post: Amazon vs. eBay: And the Winner Is… ?
Amazon vs. eBay: the ultimate head-to-head.
Following up on Stuart Lisonbee’s excellent blog entry here on DropShippingBlog.com post about competing against Amazon, today we’ll take a look at which site — Amazon.com or eBay.com — is the best place for you — the small to medium size online retailer — to set up shop and sell your wares.
If you ask loyal eBay sellers which online mega-shopping sites is best, they’ll probably claim that eBay is far superior, supporting a free-market approach that allows sellers to develop and market their unique brand. If you ask longtime Amazon sellers which retail space they prefer, they’re likely to declare Amazon the champ, citing the consistent, safe-shopping experience that Amazon offers its customers.
A good way to judge which sales venue is best for your online drop-ship business is to perform a point-by-point comparison. In the following sections, I do the work for you, comparing eBay and Amazon side-by-side in a dozen categories:
- Seller Fees & Commission
- Auction or Fixed Price?
- Community Culture
- Platform Stability
- Feedback
- Brand Building
- Images
- Taxes
- ASP (Average Sale Price)
- Payment Methods
- Returns & Guarantees
- Packing and Shipping
1. Seller Fees & Commission
In terms of seller fees and commissions, Amazon may seem to charge more at first glance. In some categories, Amazon takes a greater percentage of the sales price than eBay. However, when considering other factors, eBay loses some ground:
- While there are a few exceptions, in most cases you must pay for every item you list on eBay regardless of whether it sells.
- If an item fails to sell, you have to spend extra time re-listing it, and pay another listing fee.
- You have to collect payments and deal with buyers who fail to pay.
- PayPal can process payments, but the PayPal fees can be substantial.
Amazon collects the payment from the buyer and deposits the funds into your checking account for no additional fee. This allows sellers more time to concentrate on sales, rather than collecting payments.
And the winner is: Amazon
2. Auction or Fixed Price?
eBay is still the king of online auctions, while Amazon reigns supreme in the fixed-price arena. Amazon tried the auction format in past years but recognized that its core strength lies in fixed price listings. Which venue is better for you? That depends on what you’re selling:
- Collectibles: For collectibles and rare items, auctions are a good way to get true market value. At eBay, you are more likely to find shoppers looking for those unique items and engaging in bidding wars that drive up the price.
- Practicals: Practicals are commodity items – products people want to buy quick and easy and get on with their day, such as books, CDs, DVDs, office supplies, and software. Amazon excels in this area. Buyers can easily find quality merchandise and the checkout process is quick and easy.
Amazon is the fixed-price king, because it offers an enormous selection, competitive pricing, and consistently reliable delivery. Amazon customers tend to be more affluent. They want quality and convenience and are willing to pay a little more to get it. While eBay is moving more toward the fixed-price transaction, the typical eBay shopper tends to be more of a bargain hunter, so eBay sellers may find it challenging to pull higher profits from their fixed-priced listings on eBay.
And the winner is: Auctions: eBay
And the winner is: Fixed Price: Amazon
3. Community Culture
You might think that having a strong sense of community is a good thing, but that’s not always the case when you’re an online retailer. eBay, for example, has traditionally had a strong sense of community. It’s common to see a lot of interaction between eBay buyers and eBay sellers. Unfortunately, this means sellers have to spend more time with buyers per average transaction.
On Amazon, buyers and sellers typically interact only when problems arise. The buyer finds a product and orders it, the seller ships it, end of story. Transactions are much more efficient.
And the winner is: Amazon
4. Platform Stability
Online retailers rely on the stability of their chosen platforms to operate smoothly. Changes cost time, and time is money. Sellers have developed systems for listing, selling, and delivering items efficiently. With every change to a rule or procedure, the retailer needs to adjust, and each adjustment costs time, money, and aggravation.
Amazon has initiated very few major changes over the past few years. Although some sellers feel that Amazon is a highly restrictive venue, those restrictions have kept the system very stable and consistent. When changes have been implemented, they tend to stick and sellers can adjust.
eBay, on the other hand, has introduced sweeping changes over the past few years, affecting seller feedback, fees, digitally delivered items, search result rankings, Detailed Seller Ratings, and eBay’s affiliate program. Even more are expected. Some changes have been rolled out – only to be reversed soon afterward. These changes have confused and upset many sellers and resulted in much downtime and lost sales as eBay sellers have struggled to adapt.
And the winner is: Amazon
5. Feedback
Both eBay and Amazon have a feedback system that allows buyers and sellers to record their impression of a transaction. Both sites allow buyers to leave positive or negative comments for sellers, while sellers can leave only positive comments for buyers.
Much emphasis is placed on the eBay seller’s Feedback Rating. On the other hand, Amazon buyers are generally more forgiving in this area. Amazon’s A-z Guarantee may have a bearing on this by making the buyer feel more protected when purchasing an item. More than any other mass-market retailer, Amazon has built a high level of trust with buyers.
When a seller receives negative feedback, eBay manipulates search results so that seller’s items are not as prominent as a seller with more positive ratings. Amazon does not “disadvantage” sellers, by moving them down in the search results when they have a lower seller rating.
And the winner is (especially for sellers): Amazon
6. Brand Building
Amazon restricts sellers from reaching out to buyers and marketing to them directly. Traditionally, this has been an advantage to eBay since eBay allowed sellers to link to a site off eBay from the seller’s About Me page.
eBay listings can be customized using HTML to highlight the seller’s brand or personality. Amazon is quite different, allowing no such customization, choosing instead to emphasize consistency throughout its marketplace.
Another area eBay can be used as “branding tool” is the eBay Classified Ad. eBay Classifieds are listings that function less as a direct selling page and more as an advertisement. The reader is invited to contact the seller offline. This format may also be used to display a form for capturing a person’s information to develop a newsletter mailing list and promote your business very effectively.
And the winner is: eBay
7. Images
A good image can make all the difference.
Online retailers are well aware of the competitive advantage of a high-quality photo, especially on sites like eBay, where sellers can post their own photos. Often, the seller with the best photo gets the sale, even when charging a higher price.
Amazon is different. An individual product usually has one photo, and one description page, and all sellers use the same page.
Generally, the first photo posted on a given product is the photo everyone uses. Some sellers don’t like the idea of other sellers using their photo, but the “one photo fits all” approach functions fairly well for this fixed-price king. After all, how many photos of a book cover or CD case do you really need? As an Amazon seller, piggybacking on stock images saves a considerable amount of time.
In addition, Amazon buyers are much more willing to buy an item without a photo than eBay buyers. The shoppers at Amazon understand that the image they see is generally just representative anyway.
And the winner is: eBay (if you take outstanding photos with little time and effort)
And the winner is: Amazon (for everyone else)
8. Taxes
As a retailer, you’re ultimately responsible for collecting and paying any state sales tax due, but Amazon and eBay provide different methods for charging and collecting this tax:
- Amazon: Amazon doesn’t charge buyers a separate sales tax, so if you don’t want the sales tax coming out of your pocket, you have to roll it into the product’s price. Unfortunately, this makes it look as though you are charging more for the product.
- eBay: eBay provides a mechanism in the Sell-Your-Item form to charge tax in addition to the sale price. You’re still charging a tax, but it remains separate from the price the buyer sees.
Until Amazon implements a mechanism for keeping product prices and sales tax separate, eBay has the edge.
And the winner is: eBay
9. (ASP) Average Sale Price
Amazon buyers have been shown to be more affluent and willing to spend more for an item. eBay buyers tend to look for bargains and are willing to wait through a seven-day auction to save a buck.
It’s not uncommon to use eBay to source products at rock-bottom prices, and then resell them for good profit on Amazon. Amazon buyers often don’t even look on eBay, and they ultimately pay more – that’s good news for Amazon sellers.
And the winner is: Amazon
10. Getting Paid
Amazon offers sellers a very convenient system for collecting payments from customers – Amazon Payments. Amazon collects payments and deposits them into your bank account twice per month (more often if you choose), charging no additional fee for processing transactions.
eBay sellers can accept cash (only in person) or PayPal. If you sell an item for $500, and collect payment with PayPal, you pay 2.9% + $.30 ($14.80) in PayPal fees. Don’t forget, Amazon charges a higher commission on the item’s sale price, but it’s a small price to pay for the headaches it saves sellers.
Amazon sellers do not have to send invoices or payment reminders, or track unpaid items. If Amazon cannot collect the payment, you don’t have a sale, and your item is still listed on its site. eBay’s system requires more work, more time, and ultimately costs more to manage as a seller.
And the winner is: Amazon
11. Returns & Guarantees
Some eBay sellers fear Amazon because of its obligatory return policy stipulated in the A-z Guarantee. This guarantee allows the buyer to receive a full refund, for up to 90 days, if the item is “materially different” from the item described. Amazon usually sides with the buyer. Even though a seller may appeal, and sometimes wins, that sounds pretty tough.
The eBay seller is free to fight it out with buyers via a dispute resolution, but this could ultimately result in negative feedback for the seller. As a seller, you’re not required to offer a refund, but if you use PayPal, your funds could be held or you may even receive a charge-back against your account.
The end result is basically the same whether you’re selling on Amazon on eBay, but Amazon’s process is much cleaner and hassle free.
And the winner is: Amazon
12. Packaging & Shipping
eBay sellers have long looked at shipping charges as a small revenue stream. They bump up shipping prices to cover the cost of shipping supplies and expenses and skim a little extra for themselves. The fact is, many sellers have turned this legitimate charge into a way to recoup their eBay fees.
eBay has now begun penalizing sellers who charge above average shipping amounts by lowering their visibility in the default search results. Conversely, they give breaks to sellers who offer free shipping, in effect hurting sellers who cannot afford to do so.
In most cases, Amazon gives sellers a “shipping credit” based on an item’s category. This does not always cover the full shipping amount, but it usually does. The amount is fixed by Amazon. You cannot ask for more from the customer, and even if the shipping credit does not cover your shipping costs, you must ship the item. Since the shipping credit is fixed, however, you can usually estimate how much extra it will cost to ship the product and then roll that amount into the price you charge for the product.
Which is better? Having more control over your shipping costs (as you do on eBay) is always a plus, but you really don’t lose that much money with Amazon’s approach as long as you account for excess shipping costs when setting your prices.
Where Amazon really pulls ahead in this area is with their Fulfillment by Amazon (FBA) program. FBA allows sellers to send their merchandise to one of Amazon’s warehouses, where Amazon pulls, packs, and ships the items when they sell. (Note: Amazon takes responsibility for refunds and returns for items sold this way).
FBA fees are low, which allows sellers to focus more on selling and less on order fulfillment and customer services. eBay has yet to develop a program to seriously compete with FBA.
And the winner is: Amazon
And the Winner Is… ?
You may have noticed that Amazon is the clear winner in eight of the twelve categories, while eBay excelled in only two. This doesn’t exactly mean that eBay sellers should jump ship or Amazon sellers earn bragging rights. The fact is that both retail venues have their strengths and weaknesses.
As an online retailer, you should simply acknowledge the pros and cons of every available retail space and then choose the one where you want to focus most of your efforts. Don’t rule out one option, however, simply because you find it too restrictive or troublesome. Keep in mind that shoppers have their preferences, too, and you want to be marketing and selling your products where people are buying them. By selling on both sites, you are potentially getting millions of additional eyeballs on your products. And when you accomplish that feat as a seller, the winner is… you!
About the Author: Mikal E. Belicove is an Entrepreneur magazine contributing writer, and a business strategist specializing in content development, market analysis, and messaging/positioning for individuals and businesses of all sizes. Mikal’s latest book, “The Complete Idiot’s Guide to Facebook,” will available in June 2010, while his current title — “2009 Internet Directory: Web 2.0 Edition” — is available now at fine booksellers everywhere. You can read Mikal’s monthly column on social media marketing and website promotion, management, usability, and design in Entrepreneur magazine. When he is not working, Mikal can be found musing about the world on Belicove.com and can be reached at Mikal [at] Belicove [dot] com.
