The funny thing about eBay and Amazon is that they’re actually complementary. You really can’t pit them head-to-head because a lot of people buy stuff from Amazon, and then resell on eBay, and vice versa. This is called arbitrage.
If you think that sounds crazy, it isn’t, because a lot of people are making money hand over fist through such arbitrage. And the funniest part, is that when people have a problem with stuff that they buy on eBay, they actually return it to the Amazon seller. Ironic, right?
That’s how many people have mastered the game. Now, you may be thinking to yourself, “That’s crazy. How high is their profit margin?” It turns out that the profit margin is actually razor thin; on a good day, 5%.
You may be thinking to yourself, “Is that even worth it? Is the return on investment there? More importantly, is the return on effort there?” You’d be surprised, because a lot of eBay sellers are actually not physical people.
Of course, physical people own those accounts and benefit from the sales, but they set up software. So when you do business with an eBay seller, it’s actually software that takes your order and then channels it through seamlessly and completely invisible to you, to Amazon.
The Amazon seller then, uses software as well to process your order, and then ship it out to you. If there is a problem, that’s probably the only time you’re going to deal with a flesh-and-blood human being.
But outside of that, it’s a very smooth affair, and given the large scales involved, and the deep product lines that are being sold on an arbitrage basis on both eBay and Amazon, this translates to a big payday at the end of the process.
My point here is instead of looking at Amazon and eBay as essentially fighting over the same pie, they’re basically two sides of the same coin. They really provide maximum convenience as well as providing an option.
But based on the arbitragic sample that I just mentioned, a lot of surface differences between these two platforms are actually misleading. It may seem like you’re buying from a specialized seller on eBay, but it turns out that they’re just turning around and buying from Amazon.
The same applies with Amazon. You might be thinking that you’re buying from this dedicated online store based on Amazon, but it turns out that they have a source from eBay. That’s the way the game is played, and it’s really a numbers’ game. If anything, eBay specializes in loose transactions.
What do I mean by that? For example, somebody is selling a desk from their university. They were given the desk. It’s taking a lot of space in their apartment, but they don’t want to throw it away or just leave it out at the curb for the garbage collectors to pick up.
So what do they do? They put it on eBay. eBay is great if you’re looking for local transactions, if you’re looking for odd lots, if you’re looking for stuff that is obsolete, broken, slightly used, or heavily used. Amazon can’t do that. Amazon, generally speaking, is a platform for buying new stuff all over the country.
eBay is great if you’re looking for local resources. And if you want to go hyper-local, you should advertise the stuff that you’re giving away, selling, or bartering at places like Craigslist. So to go back to the question of “Can eBay effectively compete with Amazon?” The answer is a resounding yes.
Because you have to understand that the online commerce space is really comprised of many different concentric rings, and the ring of specialization that eBay is in is not completely on top of Amazon’s area of specialization. They share some commonalities, and they can compete in that shared space (despite the arbitrage that I just described), but by and large, they serve many different markets.
And this is what makes shopping online so awesome. If you’re looking for hyper-local stuff to pick up, because maybe you need a new desk for your dorm room, you can go straight to Craigslist for that. On the other hand, if you are looking for a new desk, and you’re looking for a cheap one with certain features, you probably would be better off on Amazon.
If you’re looking to bid on the cheapest desk you can find that’s completely brand new, you would be able to do yourself a big favor by buying that from eBay. You see how this works? The great thing about eBay is that there is a tremendous competitive pressure for the best prices.
Of course, there are ways marketers and merchants can get around this. The most common way, of course, is to offer a branded product. This is really the game-changer, because once consumers believe that there is a specific value in a particular brand, they are less likely to demand lower prices.
They say to themselves, “Well, this does come with the brand. I have looked at many reviews of this product, it seems to be tried and proven. Given these facts, I can understand that this brand would command a premium.
At the end of the day, you’re really paying extra money for the brand; that’s the bottom line. But the good news is a brand is something you can hang your hand on. What do I mean by that? I mean that there is a certain promise of consistency, and constancy as far as the experience you would get when you buy that brand. Surprises are less likely.
Let’s put it this way: You can drink coffee from millions upon millions of coffee shops located all over the world. In fact, in many places in the United States, there’s almost a coffee shop at every street corner.
But why do you go to Starbucks, of all places? Why do you go to Coffee Bean and Tea Leaf? Why do you go to Seattle’s Best? It all boils down to brand predictability. You may not be a raving fan of Starbucks’ coffee’s quality, but when you see that green and white mermaid logo, you know that when you buy a beverage from that place, there is a certain minimum standard of quality you should expect.
Sounds familiar? Well, it should be, because you do the same with Golden Arches and the Walmart sign. So do yourself a big favor, buy based on brand and let sellers duke it out by buying it from eBay. You can also try Amazon.