Amazon vs. eBay: Seven-Point Comparison

Entrepreneur.com

Written by Chris Malta and Robin Cowie of Entrepreneur.com

Recent changes by eBay (EBAY Quote) have caused many online sellers to re-examine their single-platform sales models. One of the easiest ways a small e-tailer can minimize the impact of changes by a single e-commerce platform is by selling on multiple platforms. It's the old cliché: Don't put all your eggs in one basket. Or in this case: Don't rely on a single marketplace for your entire livelihood.

Neither eBay nor Amazon (AMZN Quote) can claim to be the premiere online marketplace these days. But they're certainly the largest, and both have pros and cons.

To help sellers understand the specific advantages each platform offers, we've chosen seven areas of comparison to cover with e-commerce consultant Steve Lindhorst, former national eBay University instructor and author of the bestselling e-book Selling on 'The River' -- The eBay Seller's Guide to Amazon.com.

Fees

Unlike Amazon, eBay charges a listing fee whether an item sells or not, as well as any applicable PayPal fees. But its commission is also much lower than Amazon's (8% on items under $25, compared to 15%).

Explains Lindhorst: "While Amazon remains higher in hard fees, their listings last longer and require substantially less interaction between sellers and buyers."

Format

eBay popularized the auction format listing. Amazon concentrates solely on fixed-price listings. Which is best?

For antiques and collectibles, auctions are easily the best way to get top dollar. On the other hand, businesses dealing in practical, commodity items (the sort that people use in daily life) tend to do better in fixed-price format.

Through Amazon is the fixed-price king, eBay is moving in that direction by downplaying auctions and encouraging fixed-price listings. In fact, this year is the first time that the GMV of its fixed-price sales has surpassed that of their auction-style listings.

So who has the fixed-price advantage? In this case, the advantage lies in the buyer: Amazon's buyers are typically more affluent than eBay's and pay higher average prices for products.

Taxes

Marketplace sellers are responsible for the sales tax on any items sold on Amazon. They can add this cost into their product prices, but doing so is a hassle.

In its Sell-Your-Item form, eBay provides a mechanism enabling sellers to collect applicable taxes in addition to the sale price. This is a major advantage because it ensures that miscalculated taxes don't eat into a seller's profits.

Average Sale Price

eBay, by its nature, is competitive and draws buyers looking for the lowest possible prices. Amazon buyers tend to focus more on product condition than price, which may explain why Amazon sellers report higher average selling prices than eBay sellers for the same items.

For sellers, the clear advantage is with the buyers who are willing to spend more.

Payment Methods

To accept payment, Amazon sellers must use Amazon Payments. Amazon collects the payment and deposits it into the seller's bank account twice per month, with no fees added.

The benefit is that sellers don't have to send invoices or payment reminders, or track unpaid items. If Amazon can't collect the payment, the seller doesn't have a sale, and the item remains listed.

The downside is although Amazon buyers have multiple payment options, they're unable to use PayPal, which many buyers prefer for security and convenience.

eBay sellers can accept PayPal, money orders, cashier's checks or cash (in person). However, they're responsible for managing collections, which means investing more time and labor into each transaction.

Return Policy

eBay sellers are often leery of Amazon's obligatory return policy. Its A-to-Z Guarantee allows buyers to receive a full refund if an item is "materially different" from that described, for up to 90 days. In a dispute, Amazon typically sides with the buyer.

The eBay seller, on the other hand, is free to negotiate with buyers through eBay's dispute resolution and is generally not required to offer a refund. While the dispute resolution process can be effective, it can also become messy and time-consuming and can result in negative feedback.

Shipping

Some eBay sellers began using inflated shipping charges to cover their eBay fees. To counteract this buyer-unfriendly behavior, eBay now penalizes sellers charging above-average shipping prices and provides breaks to sellers offering free shipping. The downside is this hurts sellers who can't afford to eliminate shipping charges altogether.

Amazon fixes the shipping credit (the amount that sellers can charge for shipping), based on an item's category. The drawback is that this may not always cover the full shipping cost. A seller can't charge more than the set amount and must ship the item even if the credit doesn't cover the expense. However, because the shipping credit is fixed, sellers can factor it in when setting a product's retail price.

When More Is More

The bottom line is eBay and Amazon are powerful selling platforms and can both play important roles in your e-commerce business. The important thing to remember is that many online shoppers are extremely loyal to one site or the other, rarely visiting other e-commerce sites.

Says Lindhorst: "Why limit yourself to one platform? By selling in both marketplaces, you're potentially getting millions of new eyeballs onto your products."

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