Transitioning to or starting a business in the online world is no longer simply considered a smart move but instead a necessary one. The recent outbreak of the global pandemic further accelerated already expanding e-commerce marketplaces. This, coupled with the digitalization of virtually every facet of modern life, is forcing sellers to consider switching from physical to digital storefronts.
So what better platforms to do business on other than Amazon and eBay? With combined customer visits of around 7.3 billion each month, there are plenty of profits to be made.
While there is little doubt concerning the benefits of diversification, budget constraints during the early stages of online business cause new sellers to end up at the usual crossroads: selling on Amazon vs. eBay.
In our opinion, Amazon is a superior platform as far as seller opportunities go but the final decision is yours to make.
In this blog, we’ll compare the two e-commerce juggernauts based on various factors so you can begin your online selling journey on the right foot!
Despite both Amazon and eBay placing within the top 3 online B2C e-commerce marketplaces in the world, Amazon is considerably larger than eBay and outperforms its rival on multiple metrics. The following is a small market size comparison.
The Amazon Marketplace
Amazon boasts an active monthly user count of 310 million as opposed to eBay’s 180 million. In 2019 alone, more than half of all retail sales in the U.S belonged to Amazon. Just last year, Amazon Mobile’s popularity skyrocketed and ranked as one of the top shopping apps in the U.S.
It also helps when nearly 45% of all U.S homes own an Amazon Prime subscription.
A simple look at the demographics reveals a 14% global e-commerce retail market share with an international presence spanning across 58 countries. It is currently the e-commerce leader in Western Europe, North America, and India and appears to be spreading its influence across the African continent.
Amazon isn’t just an online store—immense growth over the past two decades under the helm of Jeff Bezos has resulted in a multinational, multi-billion dollar tech enterprise. The company has done well to shed its image of being a ‘one-trick pony’ by introducing a myriad of products and services. The following infographic shows why Amazon isn’t just an online store anymore.
We could go on and on about how Amazon outperforms every other e-commerce platform but you get the point. Now, let’s move on to eBay.
According to Yahoo Finance, eBay accounts for a respectable 5% share of the U.S e-commerce industry even though it recently fell short and gave up second place to Walmart. Despite having a total active user count of 180 million, sellers must face unique challenges that differ significantly from Amazon. Also, since buyers on eBay tend to purchase only from the highest-rated sellers, competition within certain niches is noticeably tougher.
To be fair, setting Amazon as a benchmark would reflect negatively for any online marketplace with the sole exception of Alibaba. eBay is still one of the largest players in the market. According to eMarketer, the U.S e-commerce industry jumped by more than 30% which—in the larger scheme of things—bears great news for sellers regardless of whichever e-commerce platform they choose to do business on.
eBay generates millions of dollars’ worth of sales from buyers outside the U.S and its largest buyer segment is aged between 35 and 49 compared to Amazon’s 45 to 54. With time, this segment of relatively young buyers will experience increased purchasing power resulting in a positive sales forecast.
One key area where eBay has the edge over Amazon is international reach. According to DigitalCommerce360, around two-thirds of all sales for Amazon come from North America. eBay, on the other hand, generates more than half of its total revenue from international buyers.
There’s no comparison. Amazon is by far the bigger corporation and dwarfs eBay in terms of both income and sales. Amazon recorded a $321.78 billion trailing 12-month revenue as of June 30, 2020, as opposed to eBay’s $10.71 billion.
The fundamental difference between the two platforms lies in their respective sales model. On Amazon, buyers must adhere to a fixed-price system regardless of whether the product is brand new or used. On eBay sellers can choose to create an auction-style listing or set a fixed price like that of Amazon.
The main reason why anyone would forgo Amazon in favor of eBay is due to the abundance of sales deals in every category. This dynamic compels new sellers to opt for the auction-style instead of fixed-price listings.
In this model, buyers bid on items for a period of 3, 5, 7, or 10-days after which the highest bidder claims the product. This is ideal for sellers who are unsure about the value of their product, are attempting to sell items that are unique or antiques, or want to generate quick sales.
Amazon’s fixed-price system is better suited for sellers that have carried out proper research regarding a particular segment or niche, know the value of the product, and wish to generate a certain amount of profit. The fixed-price model makes more sense when there is massive inventory at hand and selling the inventory over long periods is not an issue.
In some instances, Amazon permits third-party sellers to sell products on its platform; however, the company still limits the major chunk of its offerings to in-house operations.
The answer depends on what you mean by ‘better’. If the term ‘better’ here translates to cheaper then no. The more products sellers list on its platform, the more money eBay gets to make. It’s far more seller-centric than Amazon and actively favors them over its buyers.
eBay encourages sellers to partake in the auction marketplace via the eBay store or its classified section. Conversely, Amazon is buyer-centric, a fact it wishes to make abundantly clear to all of its sellers via the Seller Code of Conduct.
Amazon offers sellers the choice of signing up for an Individual selling plan or a Professional selling plan. The individual selling plan charges sellers $0.99 on each unit sold plus a referral fee that varies based on category. The Professional plan costs $39.99/mo. plus a referral fee that also varies based on the product category.
There’s no escaping the fee that Amazon applies to each seller irrespective of the volume or size of the products being sold. Third-party sellers must have clear goals before choosing a selling plan.
The individual plan is a cheaper alternative tailored for those expecting to sell 40 items or below each month.
The upside to signing up for this plan is the lack of monthly subscription fees. The downside is the inability to sign up for Amazon Sponsored Ads—the option to strategically position your offerings on different pages for increased visibility and sales. Although this feature doesn’t charge any extra fees, the base referral fee still applies.
Seasoned sellers will benefit most from the professional plan. Those selling seasonal products should factor in the monthly $39.99 cost which can rack up to around $480 per year.
To gain a better understanding of the fee structure on Amazon, it’s important to first understand how the FBA revenue calculator works. It looks something like this:
Fees vary according to the type of product being sold as well as the fulfillment method; either FBM or FBA. To explain how the calculator works, we’ve selected a random product priced at $29.94. The right side of the picture shows the Cost column which includes the following:
Note: these costs are exclusive of the $39.99/mo. and $0.99 per unit costs incurred for the professional and individual plans respectively. Also, when selling products via the FBM (Fulfillment by Merchant) method, the shipping costs do not apply. Instead, sellers will have to calculate the cost per unit to accurately determine profit per sale.
There is one more fee known as the Closing fee but that only applies to media and book-related items including videos, video game consoles, computer games, and video game accessories.
eBay charges sellers with two different types of fees named insertion fees and final value fees.
Final value fees: For each successful sale, eBay charges a final value fee based on the final sale amount. This amount is inclusive of shipping and additional charges on the item’s price but is free from tax. The following picture is taken from eBay’s Customer Service page.
The following additional fees may also apply:
Be careful, piling up listing upgrades without keeping an eye on the fees may result in a costly mishap. To avoid such a scenario, use the eBay fee calculator to accurately determine each cost before listing your product up for sale. Despite housing a seemingly complex fee structure, eBay’s seller fees are still less as compared to Amazon’s.
As mentioned earlier, eBay is seller-oriented whereas Amazon is buyer-oriented which reflects in their refund policies. To state that Amazon has won the trust of its customers would be somewhat of an understatement. According to a nationwide survey carried out by Morning Consult, the average American trusts Amazon more than the police or the government.
Much of this trust can be attributed to its buyer protection policies and in particular, the A-Z Guarantee. This feature protects buyers from the misconduct of third-party sellers whether the issue pertains to an item’s condition or delivery times. Buyers can easily request returns and refunds if they are unsatisfied with either and failing to resolve the issue may result in harsh penalties.
Amazon offers sellers an incentive known as Refund Administration Fee. According to their policy, whenever a seller offers a refund to a customer who has already paid for an item, Amazon refunds the referral fee. However, it deducts a refund administration fee amounting to 20% or $5 from the referral fee, whichever is lower. For example, let’s say a seller refunds $30 on an item that had a 10% referral fee. The refund administration fee will be $0.60 (20% deducted from the $3 referral fee).
Clearly, eBay does not place its sellers in the same precarious situation and has a far more complex return and refund policy. Its seller-oriented behavior is perhaps best showcased by equipping its sellers with a ‘No Returns’ optionality often leaving buyers dissatisfied and unable to return products.
Now, any would-be seller reading this might already be planning to forgo Amazon completely. However, such a policy may end up causing more harm than good. By creating a listing and ticking the ‘No Returns’ box, you may inadvertently send the wrong signals to potential customers. Can a seller that is unwilling to extend post-purchase services be trusted with providing quality products?
Buyers didn’t just wake up one day and decide to trust Amazon more than the local police or the government. Building and maintaining such high levels of trust is the direct result of years of building brand loyalty. The implementation of such policies makes buyers feel comfortable and willing to trust the third-party sellers of today and perhaps you tomorrow.
Nearly 150 million people across the globe have a Prime subscription that costs just $12.99 a month. An Amazon Prime membership opens the door to numerous perks including free 1-2 day shipping on most products, exclusive selection and shopping deals, the option to stream TV, movies, and much more. It’s also one of the primary reasons why Amazon has such a huge and dedicated customer base.
In many aspects, Amazon Prime works like a gym membership. Once you’ve paid, you might as well utilize the service. But how is this beneficial to the sellers? Well, a gigantic customer base that’s willing to dish out money especially during holidays like Prime Day and Black Friday is just what sellers need to maintain consistent sales and revenue.
Amazon started its operations back in 1995 with the intent to sell books online. Today, it boasts millions of offerings across 36 product categories. However, access to some of these is restricted to new sellers and requires a permit from recognized bodies. Some categories are open to Professional accounts but a few bar entry to any and every type of seller.
While Amazon does permit the sale of used goods, it encourages and even incentivizes the sale of new products. Sellers may also list refurbished electronics but only after meeting Amazon Renewed’s set criteria. Let’s go over some of the more popular and open categories sellers can enter:
For a more in-depth look at each category, click here.
Categories that are only available to sellers with a Professional account include business products, fine art, collectible coins, foodstuff, jewelry, watches, video recordings, computers, luggage and travel equipment, scientific and industrial equipment, and sports collectibles. In most cases, sellers need approval from Amazon before operating in certain categories.
So why does Amazon restrict sellers from selling certain products? The answer is simple: Amazon doesn’t want to feature any unsafe or illegal products on any of its virtual shelves. Listing such products on its platform—as well as those that can only be purchased via prescription—is strictly forbidden.
As a seller, you have to ensure compliance and adhere to Amazon’s laws and regulations. It’s better to err on the side of caution as even minor infringements may lead to the termination of a lucrative business overnight. At the very least, you may end up facing temporary account suspensions which, needless to say, are detrimental to any business. The following is a list of all restricted and/or gated categories:
Although eBay allows sellers to list both new and used goods, the auction site has always attracted those who want to engage in the sale of secondhand or used goods. Every item on eBay falls within one of the following 11 categories:
Much like Amazon, eBay has its own set of prohibited or restricted items that can be viewed here.
Regardless of whether you choose Amazon over eBay or vice versa, creating an optimized listing is a critical element of success on both e-commerce platforms. It can very well be the difference between a customer purchasing an item from your store or your competitors. The following are a few key areas you should focus on:
Notice how we said images and not a single image. Amazon allows users to upload 9 pictures for a single item. Ideally, these pictures need to be high-definition so potential buyers can clearly see your product from every angle.
Low-resolution imagery leads many to assume poorly about your item’s quality. If possible, try to create an infographic for your product that helps explain its key features. Not every buyer has the time or patience to go through the entire product description.
The second most important characteristic of a great listing is a well-researched and formatted title. However, it’s vital to understand what a keyword is and why it matters before we can move onto creating the perfect title.
A keyword is a word or a sentence that buyers type in the search bar to find certain products. For example, you might be planning on selling chairs on Amazon in the near future but the question is what type of chair? There are computer chairs, gaming chairs, office chairs, wooden chairs, and so on. Selecting the right keyword will cause your product to appear in front of the right audience.
If you’re a seasoned buyer on either marketplace then you’ll know how many sellers pay little to no attention to the product description section. The description needs to be readable and easy to understand. Make sure to list all the features, benefits, and technical details you think the customer should know about.
Another feature of a compelling product description is to list the most important features/points in bullet format. This space is also ideal for secondary keywords provided you can incorporate them in a way that appears natural and not spammy. Smart sellers fit as many keywords as they can to increase visibility and bring in extra traffic.
We hope that this guide has given you a better understanding of both marketplaces. To conclude, you should sell on Amazon if:
You should sell on eBay if:
Discover opportunities. Maximize your sales. Grow your Amazon business!