The electronic commerce (e-commerce) movement is bigger than ever and only shows signs of becoming bigger. Under the purview of e-commerce companies, both eBay (EBAY) and Amazon (AMZN) stand out as longstanding, major players in the marketplace.
Both eBay and Amazon are online shopping sites, providing visitors the ability to browse through available products listed for sale or auction through each company's online storefront. While eBay and Amazon have both evolved over time to meet the needs of today's consumers, there are distinct differences between the two companies. Amazon and eBay differ in terms of business models and pricing, services for sellers, and ancillary services for buyers.
- Both eBay and Amazon are two of the largest and longstanding major players in the e-commerce sector.
- Amazon and eBay have many similarities, primarily in attracting visitors to their site, providing them the ability to browse available products and make a purchase.
- The differences between the two companies lie in their business models; Amazon operates like a traditional retail store whereas eBay functions more like an auction house.
- Amazon relies on third-party sellers to list their products on the site so that consumers have a large inventory of goods to search through. Similarly, eBay relies on sellers to list their goods for sale to be auctioned off in a certain time period.
- Amazon is buyer orientated while eBay is seller orientated.
Business Models and Pricing Strategies
The greatest difference between eBay and Amazon is the business model under which each company operates. Specifically, eBay is an auction house and marketplace that simply facilitates the sale of goods between third-party buyers and sellers. Buyers visit the site to search for products they want to buy from a vast array of individual sellers and then bid on items through individual auctions.
Conversely, Amazon is a direct provider of goods, and customers visiting its site view products that Amazon maintains as inventory in its large network of warehouses. Amazon's products are either from their own brand or from third-party sellers, the latter of which makes up the bulk of its offerings. In 2015, third-party sellers started making up more than 50% of Amazon's sales, a number that continues to grow.
Within an auction model, eBay employs a wholesale pricing strategy. In most cases, interested buyers must bid on items for sale on eBay Sellers list auction items for a three-, five-, seven-, or 10-day period, and the buyer willing to pay the highest amount wins the product at the end of that time frame. Some items listed on eBay feature a "buy it now" option, which allows a buyer to purchase the product immediately, albeit likely for a premium.
Amazon operates as a retail outlet, providing customers with fixed prices on all products. While various sellers may list the same product, there is no need for a customer to place bids or win an auction before purchasing.
Seller Services: Is eBay Cheaper Than Amazon?
Amazon and eBay also differ greatly in terms of how each company works to facilitate sales. Because eBay needs sellers to list products on its site to generate revenue, the company is far more seller-oriented than Amazon. Notably, eBay actively invites sellers to participate in its auction marketplace, and the company provides platforms for sellers to offer products to buyers within an eBay store or through the auction site's classified section.
Amazon is more buyer-oriented, actively inviting buyers to visit the site to browse through and subsequently purchase the inventory listed on the site, as one would in a traditional retail store. While Amazon uses third-party sellers to distribute products, the company is more focused on attracting buyers to the site rather than sellers.
Amazon Seller Fees
It doesn't matter if you're a small seller or big potatoes with an already established product line that you want to put onto the Amazon marketplace as a third-party seller. Amazon offers third-party sellers two different plans (individual or professional) based on their prospective selling habits and other key features.
You'll have to decide which one fits your needs. The professional plan is geared toward those who plan on doing a lot of selling, while the individual account is a no-frills, cheaper alternative. Below are some of the features of both plans.
Amazon Professional Account
If you're planning on selling more than 40 items each month, this is the option for you. But it does come with a subscription fee of $39.99 each month. That means you'll be paying almost $480 a year to put and sell your products on Amazon. You also get access to Amazon Sponsored Products ads, which put your products into ads on different product pages for customers to view. This option doesn't have any selling fees, but referral fees do apply.
Amazon Individual Account
This plan is tailored for anyone who plans to sell less than 40 items each month. The benefit of this account is the lack of a monthly subscription fee. But you do have to pay the selling fee to Amazon: $0.99 for every item you sell on the site. There are also referral fees that apply to each sale, just like the professional account. The one downside is that you have no exposure to your products through Amazon's Sponsored Product Ads.
Here's how Amazon calculates end revenue for an item sold by a third-party seller on the platform:
- Take the item price, and add the shipping charges, which are paid by the buyer.
- Add any gift wrap charges, also paid by the buyer (if any).
- Subtract the referral fee (which is calculated on the item price as well as any gift wrap charges).
- Subtract the closing fee.
- Subtract $0.99 per item fee (not applicable to professional accounts and others who don't pay subscription fees).
- Remainder equals total deposited to the seller account.
eBay Seller Fees
Notably, eBay charges its sellers two different fees: an insertion fee and a final value fee. Here's a breakdown of each:
- Insertion fee: The company's insertion fee is the same as a listing fee. All sellers get up to 200 zero-fee listings every month. Those who have an eBay store may get more. Once those are used up, the fees cannot be refunded even if the item doesn't sell. Sellers are charged one insertion fee per listing, per category. The account holder gets one fee credit for every auction-style listing for which they paid an insertion fee, provided the item sells.
- Final value fee: If the item sells, eBay charges sellers a final value fee. The value of the fee, charged per item, depends on the total sale amount. Although tax is not included, the total sale amount includes shipping and any other additional charges added to the item's price.
Additional fees may apply. Here's a look at two of them:
- Advanced listing upgrade fees: The company charges sellers fees if they add advanced listing upgrades. The fees are based on the type of upgrade added. These are add-ons to the listing that aren't covered in the basic listing or insertion fee. Not all listing upgrades are available with every listing tool.
- Supplemental service fees: The site also charges sellers supplemental service fees. These range from shipping labels originated from the eBay site or refund reimbursements to eBay.
Additional Services for Buyers
Another vast difference between eBay and Amazon is the ancillary services available to buyers. In recent years, Amazon has rapidly expanded its additional services, most notably through Amazon Prime. The membership program requires users to pay an annual fee but grants them exclusive access to expedited two-day shipping at no additional cost, digital media such as movies, music, and Kindle e-books, and unlimited photo storage through the cloud.
The Bottom Line
Though Amazon and eBay are two of the largest players in e-commerce, both have vastly different business models. Amazon operates like a traditional retail store, attracting buyers to its site to purchase its listed inventory, while eBay attracts sellers to list their personal goods, operating as an auction house or a garage sale.
As a buyer, depending on what you are seeking to purchase, either Amazon or eBay will be a better fit for your needs. Similarly, as a seller, based on your business model and selling needs, one company will work better for your business goals.