Lending Club Blog

Amazon vs. Ebay: Who Wins in a Recession?

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.

Tuesday, February 24th, 2009 at 11:15 am

Comments (11)

  1. Amazon seems to have an edge on the marketing angle

    February 24th, 2009 at 7:16 pm

  2. Robert Boyd:

    Ebay’s down fall isnt due to the recession, its because they have
    pissed off to many of their users. My account was suspended in late
    December despite 100% positive feedback. This also suspended my
    paypal account which I have held for over 9 years rendering it
    useless. I have had to move my payment processing to Google. Emails
    and phone calls have gone no where as ebay blames paypal and
    vice-versa.

    February 25th, 2009 at 6:07 pm

  3. Rick:

    Ebay has substantially raised seller’s fees, made it all but
    impossible to accept payment through any method except PayPal, no
    longer allows sellers to post negative feedback for deadbeat buyers
    for any reason, and have seriously messed up the searching
    mechanism. There are numerous other changes that have been
    implemented over the last couple of years that make much harder to
    sell. The result is fewer interesting things to bid on. No wonder
    sales are down. Their excuse is that it makes eBay safer for
    buyers. It won’t work if they drive away the sellers.

    February 27th, 2009 at 4:22 pm

  4. When I joined Ebay in January 2000 they won on two fronts – they
    had items you couldn’t find anywhere else and they were typically
    less expensive. Now, with more competition online they are not less
    expensive nor do they have a market which doesn’t exist elsewhere.
    Add to that potential customer service problems it just makes it
    easier to buy from Amazon or other online retailers.

    March 5th, 2009 at 3:30 am

  5. [...] 4. One blogger’s perspective on why Amazon is flourishing and
    Ebay is going downhill during the r… [...]

    April 20th, 2009 at 8:31 pm

  6. [...] Amazon vs. Ebay: Who Wins in a Recession? [...]

    April 24th, 2009 at 7:35 am

  7. [...] Amazon vs. Ebay: Who Wins in a Recession? [...]

    April 24th, 2009 at 9:07 am

  8. Interesting article, Kevan, but as others have pointed out here,
    eBay’s decline is due more to bad management than any other factor.
    eBay continues to alienate its sellers and its affiliates with
    higher fees, smaller commissions, draconian rules and regulations
    and a singular inability to communicate. I’ve been seller and buyer
    on eBay since the mid-nineties and have been an affiliate, too, but
    my loyalty to eBay is exhausted. They’re a pain to do business
    with, and now their chickens are coming home to roost!

    April 26th, 2009 at 1:24 am

  9. Keith:

    amazon may seem more polished, but the fact is anyone can list
    items on amazon as long as it is in their database. (you have to
    sign up for a higher level to add items) I placed a DVD on amazon
    in a few seconds, same as I would on ebay…..The idea that amazon
    less risky because it “looks better” is just ignorance on the part
    of the consumer……. At least the old ebay had a feedback system
    you could trust to check sellers. (they new system is a joke) Its
    the new system and the higher fees that are killing ebay and
    putting people on amazon, not the “pretty page factor” I was not
    impressed by this at all. Poorly researched.

    July 15th, 2009 at 2:54 pm

  10. Sarah:

    I never sell on ebay what I can sell on amazon for one main reason:
    ebay makes you pay a fee up front, so if your item doesn’t sell,
    you’ve actually lost money. Amazon only charges you after you’ve
    made a sale.

    July 30th, 2010 at 3:45 pm

  11. Stewart:

    I have been working with eBay for over a year. There seems to room
    for scammers with eBay, though, eBay promises to repay any money
    lost. All things considered eBay offers more control to the seller
    then Amazon I think.

    October 13th, 2010 at 11:55 am

  • Archives z

Recent Posts

Finding the right company culture for you

How important is company culture to you? At Lending… Read More »
September 30, 2014

Welcome Vermont Investors!

Today, we’re thrilled to welcome residents of the state… Read More »
September 4, 2014

We filed to go public today

We filed a registration statement with the SEC today… Read More »
August 27, 2014

Our Billion Dollar Quarter

We’re excited to announce  that we’ve facilitated over $5… Read More »
July 8, 2014

Is Lending Club Available in My State?

Is Lending Club available in my state? That is… Read More »
July 7, 2014

5 Things Everyone Should Do Before a First Interview

After spending hours drafting your… Read More »
June 24, 2014

Lending Club Joins Senator Cory Booker to Discuss Improving Access to Capital for Small Businesses

Read More »
June 20, 2014

Lending Club Named a CNBC Top 50 Disruptor for a Second Year

For the second year in… Read More »
June 17, 2014

PRIME is now Automated Investing

Lending Club is excited to announce that PRIME has… Read More »
May 14, 2014

Why Dana joined Lending Club, or, four things you should look for when you make your next move

Read More »
May 14, 2014