The electronic commerce (e-commerce) movement continues to gain momentum as more consumers embrace the convenience of shopping from the comfort of their homes through online platforms. 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 operate as online shopping sites, providing visitors the ability the browse through available products listed for sale or auction through each company's online storefront. While eBay and Amazon have each evolved over the last few years to meet the needs of today's consumers, there are distinct differences between the two companies. EBay and Amazon differ in terms of business models and pricing, services for sellers and ancillary services for buyers.
Business Models and Pricing Strategies
The greatest difference between eBay and Amazon is the business model under which each company operates. EBay is an auction house, and the company 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. For some products, Amazon allows third-party sellers to offer purchase options to buyers, but the company keeps the majority of its products in-house.
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 at 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.
EBay and Amazon 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. 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 and browse through and subsequently purchase its own inventory. While some third party sellers use Amazon to distribute products, the company is more focused on attracting buyers to the site.
Sellers through eBay pay an insertion fee for listing items for sale on the site, and they pay 10% of an item's sales price back to the company, up to a maximum of $250 per item. Sellers through Amazon do not pay to list items for sale, but Amazon assesses a flat fee of $0.99 per item sold. In addition to the flat fee, Amazon keeps a percentage of the total sales price of an item, ranging from 6 to 25%.
Additional Services for Buyers
Another vast difference between eBay and Amazon is the ancillary services available to buyers. Since 2010, Amazon has rapidly expanded its additional services, most notably through its rollout of Amazon Prime. The membership program requires users to pay a $99 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. As of 2015, eBay does not offer any additional services to buyers through its site.
For more on Amazon's operations, read 10 Facts You Didn't Know About Amazon.