Thursday, January 10, 2008

Why I Prefer Amazon over eBay!

I've been asked by several readers why I'm writing more positive posts about Amazon than I do about eBay, so I thought I would list the reasons. I still believe eBay can be a fantastic business again but I don't see that turnaround anytime in the near future.

Why I Prefer Amazon over eBay!

In regards to management:
  • Amazon thinks long-term while eBay managers, manage by the quarter.
  • Amazon is entrepreneurial while eBay is a consultancy.
  • Amazon takes chances while eBay manages risk.
  • Amazon is a technology company while eBay thinks they are a technology company.
  • Amazon is proactive while eBay is reactive.
  • Amazon manages the business while eBay manages the stock.
  • Amazon takes responsibility for their business while eBay deflects responsibility.

In regards to online sellers/merchants.

  • Amazon is easy to manage (from the seller perspective) while eBay requires so much more effort.
  • Amazon customers are low maintenance while many eBay customers are high maintenance.
  • Amazon generates higher ASP's then eBay for the same items.
  • Amazon makes their money on sales success while eBay makes their money regardless.
  • Amazon understands retail while eBay ... doesn't.
  • Amazon is growing while eBay is floundering.

eBay is still a huge marketplace, where you can find just about anything, but many professional sellers are changing their eBay plans. For many eBay sellers, eBay is becoming more of a customer acquisition or a liquidation channel.

Amazon is not perfect, I'm sure, but I much prefer the way they conduct business.

Just my 5 cents!

2 comments:

DT said...

I just saw your post on seekingalpha.com, and thought I'd add my thoughts here.

I would agree that Amazon takes risks over Ebay, but those risks will be costly if they don't generate bottom line results for the company. Their operations need to be tightened up further as their current operating margins don't justify the company's lofty share price.

I haven't run my analysis on Ebay, so I can't really comment there. I wouldn't invest in Amazon at the moment. I do invest in buying books from them though. They do run a great shopping experience for the customer. I just think their share price is a bit ahead of themselves.

Here's my analysis...
http://tengrand.blogspot.com/2008/01/dangers-of-amazon.html

Randy Smythe said...

DT,

Thanks for the comments. Amazon is making plans for the long haul and may at times forgo profits for growth. They have a long-term plan.

The market is not trading on the fundamentals it is traiding on the growth.

eBay is far more profitable but what are they doing with all that money? The share price reflects that.