Amazon vs eBay – Group 34, Technology of the Week
Amazon and eBay are the two most well-known online e-retailers in the Western world. Books, cars, furniture, clothes and even a jar of Tom Cruise’s breath can be find on either one or both of these online platforms. In this blog we will summarise and evaluate the differences and similarities of the two platform mediated networks. Also we will address the question how these platforms have been able to co-exist for such a long time.
Diving straight into the different value propositions, we discovered some important differences between Amazon and eBay. Amazon originally started off as online bookstore, but has expanded tremendously. It still offers predominantly first-hand products offered by retailers (B2C), but has also extended towards connecting individuals by allowing second-hand products to be sold (C2C). Amazon acts as mediator, facilitating the transaction but not creating further engagement between the actors. Amazon focuses on providing goods at the lowest prices as well as ease of purchase and delivery.
eBay, on the other hand, is particularly known for their online auction strategy; individuals can bid on an item and thus determine their own price they are willing to pay. All products on eBay are offered by individuals to individuals (C2C). Although, the online auction is still a major part of eBay’s value proposition, it has also introduced a Buy-It-Now feature by which customers can avoid the bidding an pay a fixed price. eBay acts as a moderator, providing a platform for buyers and sellers to connect.
Building on Eisenmann’s (2006), principles we can explain why neither eBay nor Amazon has driven out the other of the market space. He argues that three conditions should apply: high multi-homing costs for one user, strong and positive network costs for one user and no strong preference for special features by either side. For Amazon and eBay none of these conditions are currently present. Users can still freely, and more importantly, cheaply move from one platform to the other and can even use both. Also, because platforms are open to all users, products will often be offered on both platforms. Lastly, because the users of both eBay and Amazon’s platform require special features this opens the door for differentiation efforts which further supports the co-existence of both platforms.
One interesting point to mention is that despite their differences, Amazon and eBay also try to become more like each other. Where eBay started out selling second-hand products, Amazon has by now also tapped into this opportunity. Conversely, by introducing the Buy-It-Now feature, eBay also allows buyers to buy products for a fixed price.
Future research could explore the threat that Alibaba may pose in the upcoming year. With Alibaba’s current IPO – the biggest to date – and its sales revenue surpassing 240$ billion, it is interesting to see whether it can expand across Chinese borders and penetrate Amazon and eBay’s market share (D’onfro, 2014). Moreover, additional research could shed light on the question where eBay and Amazon will be in 5 years. Will they be able to maintain their business strategies and current market share?
D’onfro, J. (2014, September 19). 22 Astounding Facts About Alibaba, The Giant Chinese E-Commerce Company With The Largest IPO In US Stock History. From Business Insider: http://www.businessinsider.com/alibaba-facts-size-growth-ipo-2014-9
Eisenmann, T. P. (2006). Strategies for Two-Sided Markets. Harvard Business Review , 10 (84), 92-101.
Amazon.com. (2014). About Amazon. Retrieved October 8, 2014 from http://www.amazon.com/Careers-Homepage/b?ie=UTF8&node=239364011
eBay Inc.(b). (2014). ebayinc. Retrieved October 8, 2014 from http://www.ebayinc.com/who_we_are/one_company