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EBay is the world‟s largest online marketplace, accounting for $60bn sales worldwide in 2008, while Amazon also offers small businesses an opportunity to use its platform to generate sales. Despite this scale, opinion in the business community is divided about selling on eBay.
Some businesses use eBay as their only sales channel and become totally immersed in the eBay community, proudly nurturing their 100% feedback. Other businesses, however, feel that eBay sellers undercut their prices and devalue their brand. For example luxury brands like Tiffany and Louis Vuitton have been involved in legal proceedings against the marketplace.
In this extract from Econsultancy's recent report: Selling Online: a How-to Guide for Small Businesses, we look at the pros and cons of selling on eBay and Amazon for small businesses...
Should a business be selling through eBay or Amazon?
The simple answer is that all online retailers should investigate selling on both. Selling through multiple marketplaces allows businesses to reach different customer bases and increase sales.
Advantages of eBay...
On top of the general benefits of marketplaces mentioned above, eBay has some specific advantages worth highlighting:
- Branding. EBay offers multiple opportunities to create a branded presence including HTML listings and eBay shops.
- Feedback. EBay‟s famous feedback system provides a trading history for every member, acting to reassure customers that they are dealing with a reputable business.
- Payment protection. For products purchased via PayPal, consumers and retailers are both covered for up to £3,250 per year (some conditions naturally apply).
- Disposal of distressed stock. Whilst a good marketplace for just about any product, eBay is particularly good for disposing of distressed stock and gets far higher prices than traditional liquidation channels.
- Low prices. EBay is the place where buyers go to find bargains. Subsequently, there is fierce competition in the marketplace and prices there tend to be lower than on the high street, or even on the wider internet. This has lead to accusations that eBay drives down prices and devalues brands. Many sellers on eBay are sole traders with low fixed costs and no requirement to charge VAT on their sales.
- Fraud. Unfortunately the very openness, ubiquity and ease-of-use of the eBay system make it a magnet for fraudsters of all types. This takes several forms including identity theft, items not as described and products not arriving at all.
- Poor practices. Most sellers provide an excellent level of service but as in any organisation there are some rotten eggs.
- Fees. Some sellers complain about the high level of fees. At 8% to 10% of the sale value of an item, eBay compares very favourably with other forms of online marketing.
- Time. Answering buyer questions and providing feedback can make selling on eBay time consuming.
Advantages of Amazon...
- Easy to list. As Amazon has its own catalogue, listing products is trivial. Products which are not already in the catalogue can be added as long as they have an EAN or UPC number (a barcode, basically).
- A-to-Z guarantee. Amazon guarantees all marketplace transactions so consumers can buy with complete confidence.
- Chargeback protection. Payments are managed by Amazon Payments, so sellers are protected from fraud-related credit card chargebacks. Sellers still bear responsibility for chargebacks related to their service.
- Painfully high fees. Whilst Amazon does not charge to list items, it adds a hefty sales commission of 15% (+ VAT) for most items. However, unlike eBay, which separates marketplace and transaction fees, Amazon‟s fee includes transaction processing.
- Lack of branding opportunities. Unlike eBay, there are very limited branding opportunities available on Amazon for standard sellers.
- Strict service levels. Marketplace sellers must adhere to Amazon‟s performance level policies which relate to refunds, shipping times and feedback. If a seller fails to meet certain criteria, their account can be suspended.