It is the debate of the decade; Amazon vs. eBay: where does an online seller stand to gain more? We, at Techspirited, have tried to help you make an informed choice by highlighting the differences between the two, and the benefits/demerits of using either.
Did You Know?
When Amazon started out, it was a bookstore which was operated out of founder Jeff Bozos’ garage, and their first slogan was Earth’s biggest bookstore, which aptly described the business plan of the company in its initial stages.
The ability to shop online for whatever one desires is one of the many comforts of this internet-savvy age. Amazon, eBay, Craigslist; these are just few of the many websites where any potential shopper doesn’t have to confine himself or herself to the limited products sold by a specific e-commerce store. This can be compared to shopping at a branded store, that sells singularly focused items, versus shopping at a supermarket, where anything and everything is available under a single roof, which makes things very convenient for the buyer.
But let us look at things from the seller’s point of view. If he is a retailer wanting to expand online, and he deals in a certain line of products, he would have to give his merchandise the exposure it deserves in an appropriate market. Meanwhile, he cannot afford to neglect to provide basic amenities to his customers, like a reliable payment channel and proper logistics. On the other hand, suppose the seller is a collector of rare items and is looking to sell something fine and sophisticated, like a work of art or a hand-crafted article, then what he needs is an audience and not a market. The sum of money in question may be quite large, and therefore, the payment channel needs a high level of security. Moreover, the item may be delicate, and therefore, during shipping also, it must be handled with utmost care. Then comes a third type or category of sellers who fall between these two extremes. So how does one choose between the two? For a face-off between Amazon and eBay click here.
But first, let us try to understand out how these giants work so that an aspiring seller, who does not have a clue about managing his own online store, will be able to pick one out of the two biggest e-commerce giants.
Understanding How Amazon Works
Amazon is a multilevel e-commerce website, which was incorporated in 1994, and had a meager beginning, but then built its reputation and showed immense growth in the last decade, to successfully be deemed as a colossal online marketplace. It deals in almost every kind of consumer goods, including clothing, jewelry, beauty products, books, furniture, electronic items, CDs and DVDs, toys, food, and much more. Amazon has diversified into auxiliary domains of e-commerce too. From offering retailers space to post advertisements to back-link to their own site, that is charged in the cost-per-click format, to Amazon Webstore, a feature that provides the necessary tools and support to those aspiring to open online stores. After which, their sales procedure can be integrated with Amazon Associates, an affiliate program, where Amazon’s products and/or services are advertised on the affiliate’s site, that too as per the seller’s choice. Sellers can also earn advertising fees, and avail the option of employing Amazon Payments as their payment channel on their personal website (if you require one).
In spite of trying to be more customer-centric, Amazon has succeeded in creating a very conducive environment for sellers. Both retailers and individual sellers have options to choose from. The Professional selling package is something businesses or individuals, who would be selling over forty items in a month, can opt for. They are charged a monthly fee. The other alternative is the Individual selling package, where the seller is charged per item sold. Professional sellers are given other benefits, such as, they have access to records and reports of orders, and can also use a variety of tools to load their inventory, they can offer gift-wrapping to customers, they can sell in any category (there is a restriction placed on Individual sellers in some categories), and so on. Sellers wishing to market used goods, can do so on Amazon Marketplace, and Amazon provides them the advantage of displaying their listing alongside another listing of the same product, being sold at a higher price.
The Fulfillment plan by Amazon was one of Amazon’s most profitable brainwaves. Subscribers of this plan, send their items to be sold to Amazon’s warehouses either using Amazon’s shipping carriers or as per their preference, and these items are received, sorted, inventoried, and stored. Then, Amazon lists the items on their different portals, and when customers order the products, they are packed and shipped to them. Free shipping is offered to customers buying items procured under this plan, and even customer service is taken care of by Amazon. Another convenient feature, Amazon Advantage, allows distributors of media (books, video, music) to directly sell their goods on Amazon. It is especially handy for self-published artists or authors, or dealers who needs assistance with order-fulfillment.
It is self-evident why Amazon is not just a popular name when it comes to shopping online, but veritably one of the best examples of a new-age success story, of a small business that has risen to become a global phenomenon.
Understanding How eBay Works
eBay was designed to run along very different lines from Amazon. It began, essentially, as an online auction website, and has now become a huge online marketplace. Unlike other e-commerce ventures, on eBay, generally, buyers and sellers interact almost directly while the website provides a smooth channel. Almost anything can be bought and sold on eBay, with a few exceptions, which include (but are not limited to) illegal objects, human body parts, and non tangible objects.
Earlier, the general format of the buying and selling procedure was via bidding, i.e., the seller posted his or her item with a description, the opening price, and maybe a picture, and potential buyers used to bid on the item. Buyers needed to enter their minimum and maximum bid, and eBay carried out the process, starting by placing a bid with the minimum value, followed by incrementing the bid gradually, until the maximum value was reached. If the buyer was outbid, he or she was informed and had the option of withdrawing from the auction or increasing the maximum value.
Sellers were offered the facility of entering a secret minimum selling price, and if the auction failed to fetch that price, the owner did not have to part with the item put up for sale. In later years, buyers were also offered the facility to click on a button labeled Buy it Now, wherein suppose the bidding process for an item hadn’t started yet, the item could be directly bought at a price significantly higher than the seller-ordained opening bid, and the auction process could be skipped entirely.
The Buy It Now system soon matured into the arrangement of fixed-price selling. In fact, in recent years, there has been a shift in the dominant strategy of the website. Fixed-price listings are quite popular and have gained more importance on the website as well, and this was how eBay adapted to the changing needs and saved itself from becoming outdated and redundant in the constantly evolving online world.
Average Fees Charged to Sellers: A Comparison
If you wish to make a sale using either Amazon or eBay as a medium, the costs you will incur should be a major factor to help you decide which one to choose. We have tried to clearly spell out how each of these online-shopping titans charge the prospective seller to carry out their business via their respective websites.
- All payments made by buyers are collected and processed through Amazon Payments, and after levying applicable deductions, the balance is credited to the seller.
- Firstly, the seller needs to pay a subscription fee of USD 39.99 or the per-item-sale fee of USD 0.99 (mutually exclusive to the subscribers of the Professional or the Individual selling packages, respectively).
- Additionally, the seller is charged a referral fee that differs with the product type, and is calculated as a percentage of the sum total of the item price and any gift wrap charges, if applicable.
- Finally, a variable closing fee is charged to the seller, which depends on the product type, under each category, the weight, and whether the dispatch is domestic standard, domestic expedited, or international.
- Any product sold always needs to be shipped to Amazon first, and Amazon ships it to the customer. While the cost of shipping to Amazon is borne by the seller (even if the seller uses the Fulfillment plan, they have to pay a discounted fee since they will be utilizing Amazon’s shipping channels). But, shipping to the customer is borne by the buyer himself, and this amount is paid to the seller, to help him recover his shipping cost. There are standard shipping charges to the customer under normal cases, which varies with the category of the product and the category of shipping, but Amazon Webstore sellers can set their own shipping costs.
- Sellers who opt for the Fulfillment plan have to pay a minimal fee for storage, and are also charged for fulfillment, but that depends on the price and weight of the items.
- Additional taxes are also charged to sellers, wherever applicable.
- Sellers are not charged by Amazon Payment for the usage of their services as a payment channel.
- Sellers are charged with an insertion fee, which is a basic amount that needs to be paid per listing, and per category in general. The amount charged depends on the selling format (fixed-price or auction-style), the duration of the listing, and on whether the seller is a Store Subscriber.
- If the seller wants to list an item in the Motor vehicles, Real Estate, Classified Ads, or certain select Business and Industrial categories, the basic insertion fee is more.
- The seller can opt for advanced listing features, such as Gallery Plus (a larger picture appears in search results, making the listing more attractive to potential buyers), Bold, Subtitle, Designer, (all three are design improvements that make the listing stand out), which are free for some categories but chargeable in others.
- There are certain other features like International Site Visibility, listing in two categories, and setting a Reserve price (a minimum amount that the item must be sold for, in auction-style selling), which are also chargeable separately.
- The insertion fee, and the advanced listing fee (if opted for and if applicable) need to be paid each time the same item is to be listed. Depending on the seller’s preference, re-listing can happen automatically or manually.
- If the seller is a Store Subscriber, he or she would be charged according to a different plan; a monthly amount would be charged for a fixed number of listings.
- When the item is sold, the seller is charged a final value fee, which is10% of the total amount of sale up to USD 250, that the buyer incurs (including shipping charges or any other charge levied on him or her by the seller, sales tax additional).
- If any supplementary services were opted for, such as Global Shipping Program and Hassle-free Returns, the seller is charged additionally.
- It is mandatory for sellers on eBay to give at least one payment option. PayPal has been the preferred choice for many years because of its ease of use, and since it is an owned subsidiary of eBay. With the exceptions of Payment upon Pickup, and the use of a Merchant Credit Card (in which case eBay does not charge a fee, but the Credit Card payment channels may levy a charge on the seller), a fee is charged by all the payment options, which has to be borne by the seller.
Amazon vs. eBay: The Ultimate Face-off
There is no better way to compare two competing entities, than to check how they hold up when reviewed under various criteria, and place the findings against each other. We have looked into how feasible it would be to pick each of these two as the portal to market one’s goods online, with respect to nine different important aspects of selling.
#1 The Market
The kind of market that a seller is exposed to on Amazon is one of consumers who do not care about clinching a bargain, but rather, a deal that is more convenient for them. Retailers, wholesalers, distributors, or individual sellers looking to get rid of a lot of junk, would face better luck than a person looking to sell a one-of-a-kind item, and he would be at a disadvantage. Also, sellers who wish for their merchandise to have an auction-style sale, and are looking to get the best value, cannot do so on Amazon. Since eBay offers an auction-style selling format, it is the perfect platform for those who are looking to buy or sell a rare collectible item to a target audience at the most suitable price. But one must remember, that selling something in the auction pattern also exposes the product to the risk of being sold at less than its actual value.
#2 Limitations on Salable Products
Amazon does not allow sellers who have subscribed to the Individual selling package to sell items that belong to certain categories. The number of categories available altogether to choose from, even for a Professional seller is, although a large number, not all-encompassing when it comes to what all one can possibly sell. All eBay users can sell in whichever category they wish to, irrespective of their subscription type. eBay also allows users to buy and sell in categories like Motor Vehicles and Real Estate, which is uncommon on similar e-commerce marketplace websites.
#3 Platform Consistency
In Amazon, understanding the system is quite simple. Moreover, the general structure behind the working of the site changes only once in a blue moon, and even when it does upgrade, the changes are not so drastic that one has to re-understand the way Amazon works. In recent years, since eBay had been vastly criticized for its vulnerabilities and for phishing, and with the auction trend slowly dying out with internet shoppers wanting a hassle-free experience, the company had no choice, but to make a dramatic shift from its original business vision. Auction-style selling is still prevalent, but it has taken a backseat, and the focus has shifted to fixed-price listings. With eBay changing its strategies regularly in order to keep up, the seller has the extra task of keeping himself abreast of the latest policies from time to time.
#4 Integration of Different Domains
Everything is integrated in Amazon’s platform. The seller does not have to worry about figuring out which of the many options he has to employ when it comes to the selling format, market research, payment providers, logistics, and so on, because Amazon has proprietary means for all of them on their own platform. On eBay, there are multiple third-party channels to choose from in each domain, be it market research, payment providers, or shipping. On one hand, this offers the seller flexibility, but on the other, the seller is vulnerable to the risks that accompany favoring that particular provider separately, in each of the domains, his total expenditure will vary with his choices.
#5 Involvement of the Seller in the Sales Process
Amazon limits the seller’s involvement to a minimum; once the item listing is made public, neither does the seller have to worry about being re-listed, nor does he have to set aside time for building relations with the seller. Goods, once shipped to Amazon, are no longer the responsibility of the seller. Amazon even takes care of customer service. It becomes even easier for the seller if he is a subscriber of the Fulfillment plan; he does not have to worry about the hassle of shipping and delivery. Rather than offering new sellers a chance to build their brand, Amazon is suited for those who are not trying to establish their name, but instead are focusing on selling the product itself. Managing an eBay business requires focus and involvement. A seller cannot put up an item for sale/auction and then forget about it, as he needs to keep working on getting visibility for his products, positive feedback, and other things. The seller also takes decisions about the business research provider, means of packaging, the shipping provider, and the payment channel. eBay allows its sellers to establish their identity with profile pages, item descriptions authored by the sellers themselves, self-uploaded images of the item for sale, and feedback from buyers.
#6 Buyer-Seller Interaction
Amazon buyers and sellers rarely communicate. The platform itself has been designed in such a way that both parties would let the medium, i.e., Amazon, to handle the whole procedure, and they are absolved of the overheads of directly interacting with each other. eBay facilitates and encourages interaction between buyers and sellers. It is a place where small business owners who want to keep track of and have control over the entire process, and want to maintain a rapport with customers as well, can flourish.
#7 Visibility of Listings to Prospective Buyers
The appearance of an item’s listing on Amazon does not depend on buyer feedback, but rather happens rotationally, and as per the selling package subscription. If the seller is a subscriber of the Fulfillment plan, Amazon even makes sure that the item for sale is visible to (apart from regular buyers) Amazon Prime customers as well. Also, in the interest of providing options to the buyer, Amazon lists some items alongside other similar listings, if its price is less. Visibility of the item’s listing is a huge problem for new, inexperienced sellers on eBay. The item may end up right at the bottom of the list, buried under listings of items that are better priced, or of which the seller has very good feedback, and invariably remain there for so long that their time may run out, and the seller will then have to shell out a listing fee once again.
#8 Seller Protection and Security
Since Amazon is mostly customer-centric, if there is a dispute between the seller and buyer (such situations are generally settled by the company itself, which acts as a mediator), then it has been reported that Amazon has a tendency to side with the buyer rather than the seller. eBay does have more security issues, since buyers and sellers directly interact. The website has spelled out clear guidelines for buyers and sellers who fall prey to fraud, and even offers them the option of buying shipping insurance. There also exists a Resolution Center where buyer and seller disputes can be settled. Recently (since September 2014), a policy favorable to buyers, called the eBay Money Back Guarantee has been incorporated, which allows buyers to file for a refund if they do not receive the item they purchased, and this amount would be charged to the seller.
#9 Seller’s Access to Sale Proceeds
The end-to-end sale process, right from procurement, storage, inventory, packaging, shipping and delivery, and finally the processing of payment, is taken care of entirely by Amazon, and it obviously takes time. In cases where Fulfillment plan is also being opted for, more delay will be introduced. The time taken for the funds to reach the seller (after the deductions), since the day the order is placed by the buyer, is approximately fifteen days On eBay, the seller chooses the payment channel. If he chooses an online transfer medium like PayPal (which is also, interestingly, an owned subsidiary of eBay) the funds get transferred to him immediately. There is no question of any middleman processing the whole thing and bringing in delays.
It is evident that there are stark differences in the way Amazon and eBay function, and this is because of their entire journey as companies, right from how they started out, to the position they hold today. It is also obvious that there are merits and demerits of the systems of operation, that each of the two follows.
Hence, the seller must decide which platform he wants to use to set up his online business, not on the basis of the features it provides, but rather, taking into account his own requirements.
He needs to keep two important points in mind; what his product is, and what his own limitations are, with respect to finances and resources. Considering these two, he must make an informed decision or his business would suffer.
For example, suppose the seller is a retailer, or distributor of a particular brand, who not only has adequate funding, and a large, and readily available consignment of similar items, Amazon should be his choice, since Amazon will not only take the goods off his hand, but he would be able to expand into yet another market which would be profitable for him.
On the other hand, if the seller was selling a rare, collectible item that would fetch a good price, eBay would be a better option for him, because eBay can provide the right kind of customer base who peruse the internet in search of specific articles.
Another example is that, a dealer in used electronics would prefer Amazon, whereas a person looking to sell his old mobile phone should prefer eBay because of the overall cost incurred being less, but at the same time, he has to remember that if he is selling for the first time, his listing may be buried under others, unless he uses techniques to gain visibility (better wording, better pictures, more competitive pricing, etc.)
At the end of the day, the success of a business not only depends on the virtues of the platform but also on the seller himself. Commitment, dedication, and a proper business plan are more important than anything else, for someone wanting to establish a successful online business.