Wednesday, October 22, 2008

(Part 2) Amazon vs eBay. Selling on Amazon or selling on eBay? Which is the best option for online vendors

Coming from Online retailing Amazon vs eBay. Selling on Amazon or selling on eBay? Which is the best option for online vendors (Part 1)


• Fulfillment by Amazon:

Since the beginning, Amazon invested heavily on automated fulfillment and distribution centers. This is one of the main reasons eBay has been able to expand faster (geographically) than Amazon. eBay is a 100% online business while Amazon has to invest time and resources to build its fulfillment centers. Anyway, coming back to the point of view of an online vendor this is a very important difference between the two platforms: Amazon offers the possibility to outsource the fulfillment (storing, picking, packing and shipping) while eBay doesn’t. Amazon calls this service “Fulfillment by Amazon FBA”

• Return policy / Guarantee:

This is one of the most important differences between the two platforms: Amazon has a full guarantee designed to protect the buyer while eBay does not. This might not seem too important but it is on the long run, because it’s a way to autoselect the kind of buyers and sellers you want to have in your marketplace. Amazon’s guarantee is the “A-to-Z Guarantee protection”.
The guarantee obliges any seller to refund or resend the item to the buyer in the event of a claim. This is designed to offer confidence to buyers so they know that they anything they buy on Amazon or from an Amazon third party seller will be as described. Sellers that don’t comply with Amazon’s minimum ratios of client service, by failing consistently to refund/resend items to buyers eventually will not be allowed to sell on Amazon. This means that only good quality service sellers will be allowed to remain selling on Amazon. What Amazon is doing with this is very clear: It’s eliminating one of the most important reasons that kept buyers from buying online, which is fraud/forgery. eBay does not function like this at all, eBay is not responsible of what the seller does or sells. This is why there have been so many claims of false luxury goods of the most prestigious brands being sold on eBay but the problem continues. The way buyers can penalize bad sellers in eBay is through reputation (giving a bad feedback) or through eBay’s Resolution Center which depending on the case and the allegations, can take some time.

All this explanation of the way each platform tries to protect its buyers from forgery/fraud is just to show you how it directly affects the sellers. Sellers of fake items or items with a very low quality won’t go to Amazon because they know that they will have to pay the buyers in case of claims or they will be kicked out of the marketplace. The outcome of the guarantee, besides obviously protecting buyers, is that Amazon is self-selecting good quality sellers for its platform.



SELLERS Perspective

Amazon

eBay

Fees

MORE EXPENSIVE

- Listing Fee: Low for volume

- Commisions: High 15%

Better for high volume // High rotation items

CHEAPER

- Listing Fee: Low for individual listings

- Commisions: Low 8%

Better for High price // Low rotation items

Format

Fixed Price Format

Fixed price + Auction

Auction: Better for Antiques and Collectibles. Ebay moving into Fixed Price direction

Average sale Price

BETTER

Buyers pay more on average for the same items

WORSE

More price competition

Payment Methods

LESS OPTIONS BUT EASIER TO MANAGE

If Amazon can't collect the payment, the seller doesn't have a sale, and the item remains listed.

MORE OPTIONS BUT MORE COSTLY

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

Return Policy

WORSE

Tight claim and quality control. If many clients solicit returns, they can be kicked out of Amazon

BETTER

Not obliged to return. The only penalty could be a bad feedback

Shipping / Fulfillment

BETTER

Amazon fixes the shipping credit, per category, regardless of what actually the shipping cost ends up being

WORSE

Seller fixes shipping price, but supervised by eBay

(to avoid overcharging)

Client Follow Up / Marketing Info

WORSE

Sellers are not allowed use the contact information for follow up marketing actions. This is a big setback for any seller because in each transaction, the seller is selling an item, but the customer is acquired by Amazon, not by the seller.

MUCH BETTER

Billing information is managed by the seller itself. The seller can decide what to do in terms of follow up marketing actions. The long term relationship will be between the seller and the client, not between the platform and the client.



Conclusions and final thoughts

• Although in general Amazon seems to have better quality of service and a more options for sellers, It’s more expensive and doesn’t allow follow up marketing actions; two things that are not trivial for sellers. In other words, It might be better… but at a cost.
• The other very important point is that the clients of both platforms tend to be loyal to their marketplace, which means that if you’re a seller on eBay and decide to start selling on Amazon, you’ll reach millions of NEW customers. Sell on both platforms, you have nothing to lose, only millions of new customers to reach.
• As a final conclusion, I could argue that both platforms should be used only to generate incremental sales, and not become the only source of income. To be so dependent on only one sales channel, has always proved to too risky….

Related content: eBay vs. Amazon, the Buyer's perspective

Copyright MBA Internet Marketing Manager


Post a Comment