Expect the unexpected when it comes to business in this economy. Case in point, Amazon and EBay.
Two of the web's premier online stores are going in opposite directions, both in the sense that their revenue and income are increasingly dissimilar and that they are producing opposite results from what conventional wisdom might expect.
Let's begin with the former. In fourth quarter earnings reports released at the end of January, Amazon and EBay were headed different ways - Amazon decidedly going up and EBay going south. Amazon's fourth quarter revenue was up 18 percent and its income rose nine percent. On top of that, industry experts predict a rise in first quarter revenue and a relatively rosy outlook for the Seattle-based e-store.
Its online counterpart didn't fare nearly as well. EBay took a drop of seven percent in revenue and a plunge of 31 percent in income. It lost customers at a rate of three percent from totals last year, and it may struggle to keep revenue losses from falling even further in the first quarter of the new fiscal year.
With these figures for Amazon and EBay in mind, it is interesting to note the expectations for each business in the current state of the economy. In Amazon's case, retail businesses nationwide are struggling immensely, and it would have been understandable if some of the consumer hibernation had an impact on Amazon's figures. With the population getting thrifty when it comes to retail purchases, Amazon was expected to feel a hit.
EBay, it stood to reason, should have found renewed life as gun-shy citizens turned to cheaper means of acquiring the toys they used to splurge on. Ebay's auction-style market seemed perfect. People could unload the items they found excessive and pocket some much-needed money. Those in search of a good deal would have a bevy of options on Ebay's pages to scrimp and save.
Only none of this happened the way anyone expected. Amazon rose; EBay fell. And experts scrambled for an explanation.
The best they could come up with was that Ebay's user experience did not meet the needs of a consumer base that preferred traditional, dependable e-commerce like that found at Amazon. EBay excels in offering a wide variety of products (thanks to third party sellers), but they lack the polished, direct selling style of their competition. Buying a product on EBay has risk associated. Granted the risk may be negligible depending on the quality of the third party seller, but even an ounce of negligible risk - for instance, in the condition of the product, the speed of the shipping process, or the possibility of a scam - is more risk than one would find buying items off Amazon. Plus, when you throw in Amazon's customer service, competitive pricing, discounts, and convenient shipping, the Amazon experience would appear to come out the clear winner.
To test this phenomenon, I went shopping on EBay and Amazon, curious at what I might find. I consider myself a relatively unbiased participant: I don't have a preference for either site, and I shop online with fair infrequency. My object of desire: a Dark Knight Blu-Ray DVD.
Searching Amazon's site was a breeze. Other than a distracting Kindle letter on the front page, I was able to type in my search parameters (Dark Knight blu ray), and my movie was the first result on the next page.
Ebay's experience was a little more stressful. The searching was easy. I typed in the same "Dark Knight blu ray" text (both sites had a helpful auto-complete feature), but the results I was given came across as horribly confusing. The first result was a 500GB PS3 for $400.00. I did not want this. There were multiple listings of this PS3 throughout the page, but I found myself overwhelmed by the amount of Dark Knight DVDs that were for sale, too. Telling them apart was a chore. I finally decided on one that had a "Buy it Now" option because I did not have time to wait a day and a half for an auction to end.
I wouldn't be surprised if a lot of consumers just give up on EBay at this point. I nearly did. Pressing forward to the product pages only further served to test my patience.
Both Amazon's and Ebay's pages were busy with ads and links and information I was pretty sure I didn't need to know. This was the first thing I noticed. The second thing I noticed was the price. Amazon's Dark Knight cost $23.99, marked down from $35.99 for a savings of $12.00, Amazon made sure to tell me (I appreciated Amazon's doing the math for me). Ebay's price was a plain-and-simple $15.26. Point, EBay.
At face value, EBay won the price battle, but below the surface there was doubt brewing in my wary consumer thinking. Why was Ebay's price so much cheaper? Is there a problem with the item? Am I sure I'm even buying the right thing? And why $15.26? Who sells stuff at such a specific price? The whole EBay page just seemed fishy with seller rankings and graphics and logos that I didn't understand. Amazon explained why its price was so cheap. EBay just left me to wonder.
I continued through on both websites, clicking the "Buy it now" link on EBay and the "Add to shopping cart" button on Amazon. Ebay's page redirected me to a sign-in screen. Amazon's added my item to a cart and suggested other movies I might want to try. Point, Amazon.
The checkout process for each was similar enough that there was no clear-cut favorite. But the overall story was different.
Amazon won, and the only thing keeping it a game for EBay was the price. Had Amazon's Dark Knight been five dollars cheaper, my decision would have been a no-brainer.
After seeing both online stores firsthand, I can see how Amazon's style might succeed in a down economy while Ebay's might suffer. Amazon seems more organized, more reputable, and it appeals to a consumer experience in more ways than EBay does. If I had been looking for a rare collectible or a secondhand item, I may have had more success on EBay. But when the buying comes down to a group of similar products at similar prices, Amazon takes the cake.
And it's no surprise anymore why they're taking the market share, too.