There are plenty of ways to sell your products, especially when it comes to your online business. You can choose between a marketplace or your own private eCommerce site. Most sellers focus on two marketplaces in particular: eBay and Amazon. But which one is best for your business? As is true with most questions in eCommerce: it depends.
In an attempt to compare and contrast, we observed the differences and similarities between the two gigantic marketplaces. Are you looking for a more competitive landscape? Or are you looking for greater control over your pricing? Each marketplace certainly has its strengths and weaknesses for different retailers. Let’s break it down by marketplace and see how they cater to different needs.
The Biggest Marketplace in the Western Hemisphere
A lot of people visit Amazon.com, and I mean a lot. Amazon.com is ranked as the 6th most visited website in the world according to Alexa. This makes it the most visited eCommerce site in the entire world. So naturally, everyone is going to want to sell on the most popular store on the Internet. The exposure is so incredible that Google ranks them as its largest search engine competitor. That’s right, not Yahoo or Bing, but Amazon.
If you’re visible on the Amazon marketplace, you’re looking at big sales numbers. The best way to gain visibility on Amazon is to win the Buy Box, which is responsible for 82% of Amazon’s sales. This box is definitely the most treasured box in the world, besides Pandora’s box maybe. While winning the Buy Box brings a similar sense to the mystery of Pandora’s Box, Amazon is the only entity that understands the algorithm used to land it.
While the Buy Box is a great place to be, that’s where problems start to come into play. After all, there are over 2 million professional sellers fighting tooth and nail to win that box because Amazon is incredibly competitive. Sellers give it their all for visibility and sales on the marketplace, even sacrificing profit margins.
Amazon just turned around a .25% loss from Q1 to a .40% profit in Q2, which is significantly less than most businesses can afford. You probably already knew this, but Amazon is known for carrying incredibly low prices every day. That’s good for consumers, but monitoring and keeping up with dwindling prices gives retailers a run for their money.
And pricing only makes up one part of the notorious Buy Box equation. You also have to properly manage your inventory and fulfillment practices, as well as prove your customer service skills. Many sellers use Fulfillment by Amazon (FBA) for these services, as it removes them from any blame if an order goes awry for any reason. Plus, those who use FBA reported annual sales growth of 20%. However, this requires additional fees and is only recommended for sellers with high margin products.
The task of selling on Amazon is a daunting one, but the reward is worth it. Contrary to this, if you’re a new seller looking for a less-stressful selling space, you might be more interested in eBay.
The Ultimate Auction
eBay is the largest virtual auction house in the world. In the second quarter of 2015, eBay had 157 million active buyers (that includes buyers and sellers). It is known to combine B2C and C2C selling in a harmonious manner. Buyers can either purchase items from a set price or bid on them like it were an auction.
This gives sellers a lot of flexibility with their prices. While auction style bidding is more common among C2C sellers, B2C sellers aren’t exactly racing their prices to the bottom. Roughly 70% of eBay’s total gross merchandise volume comes from fixed prices, but their prices aren’t constantly getting slashed. The marketplace as a whole is much more lax, and the best way to gain visibility on it is to reach the top of search results. Doing this requires some hard work, but it is drastically less cutthroat than Amazon’s Buy Box.
Reaching the top of search results does usually require a low price since most customers filter results by lowest price first. However, there are other ways to climb to the top of search results. Great seller feedback can put you above someone with sub-par feedback, enabling you to price a little bit higher and make more profit. This strategy is unique to eBay because there’s no Buy Box to appease to, and you aren’t competing with a company who is willing to sacrifice its profit for a sale.
Similar to Amazon, eBay has its caveats as well. The competitive nature of Amazon draws more consumers to the marketplace than eBay.This creates a smaller audience on eBay, providing you with fewer opportunities to sell your products. Yes, it’s laid back, but that’s largely because there aren’t as many customers to appease.
Amazon has 270 million active buyers, whereas eBay has 155 million. This is largely because eBay offers prices 10-15% higher than on Amazon. This is due to two reasons. One, sellers on Amazon have to compete with Amazon itself. Jeff Bezos is quoted as saying “your margin is my opportunity,” so you know they’ll drop their prices below yours with no problem. And two, sellers who sell on eBay and Amazon have to keep their prices on eBay higher than the ones on Amazon. It’s a rule, and violating that rule can lead to an account suspension.
Why Not Both?
Many sellers choose to sell on both marketplaces and that’s not a bad idea at all. As a matter of fact, a multichannel selling strategy is one of the best ways to get ahead of your competitors in 2015. You need to ensure a seamless selling experience on each channel though, and you have to abide by each channel’s standard rules. Implementing a multichannel selling strategy works best for sellers who are well established and can afford twice the inventory and fulfillment costs.
Ultimately, the choice between Amazon and eBay falls into the seller’s preferences. If you’re looking to rise to the occasion and try to stick out in a sea of competitors, Amazon is the marketplace for you. If you’re looking for a more laid back selling experience, eBay is the marketplace for you. But regardless of the marketplace you choose, a new channel provides you with a wider reach, so don’t let the opportunity pass you by.
Contributing writer: Brian Smyth