Amazon Vs Ebay Essay

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Comparing Amazon and eBay is really like comparing apples and oranges. The two, while appearing to be the same on the surface, are really nothing alike once the superficial labels are peeled off. eBay began as a C2C ecommerce site -- consumers selling to consumers. That gradually morphed into B2C as businesses (from big time car lots to small business owners) saw the advantage of posting items on eBay in order to boost sales. Amazon may appear to the untrained eye to follow in eBay's footsteps by offering a web-based platform where all sorts of sales strategies can be employed: C2C, B2C, B2B -- and yet Amazon's ability to dominate the online marketplace has not resulted in significant income -- at least not from this particular eBay-like niche. (Minus the platform, the two are not even similar in terms of how products are sold: eBay offers bidding and direct correspondence between vendor and customer; Amazon itself acts more as the middle man, allowing vendors to post on the site so that customers can shop). Amazon's core money-maker is in cloud services -- not in transactions between a vendor selling drapes to a customer, or a consumer purchasing books online, for example. Amazon is everywhere and is generally regarded for having ushered in the demise of the American mall -- the traditional brick and mortar store. eBay is not credited with this. Yet what money Amazon does make, is not generated via the platform that eBay essentially pioneered, though demand at Amazon is less price-elastic than among competitors like Barnesandnoble.com (Chevalier, Goolsbee, 2003). Amazon is carving out its own path -- behind the ecommerce facade. Yet, if Amazon is ever to be profitable, it has a long path forward.



Synopsis



Amazon was founded in 1994 by Jeff Bezos, who began his ecommerce site by focusing on the top five products that could be sold via the Web: videos, books and CDs along with computers (hardware and software) were the keys. Thus, the site began as an online bookstore in the same way eBay began humbly as an online garage sale store in 1995 (its original name was Auctionweb). Thus, while Amazon envisioned itself as a retailer, eBay envisioned itself always as an online auction site. Over the years, both sites have grown to appeal to producers of virtually everything.

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In fact, the only items not traditionally sold on either site are liquor/adult materials. Major suppliers are anyone who has merchandise to sell as far as Amazon is concerned -- but the main sales items remain relatively unchanged; Amazon has however ventured into acting as a streaming service -- like Netflix or Hulu -- and is essentially attempting to do everything that any other online business does. (It even recently got into the mortgage business through a brief joint venture with Wells Fargo). eBay's major suppliers range from anyone with an item that will ship to small and even large business owners. Customers are the same -- though Amazon is now selling cloud space to clients -- which accounts for its actual income in recent quarters.



Three Profitability Ratios



Three profitability ratios that creditors may be interested in are: 1) P/E ratio -- copmany's share price over its per-share earnings (the lower the P/E, the cheaper the stock is viewed to be), 2) the net profit margin (Net Margin = (Net Income or Loss) / Sales). For Amazon, this is a hard ratio to apply as the company has dipped its toes into so many sectors -- it is doing cloud services, retail, streaming, and now brick and mortar pop-ups. For eBay it is more applicable. 3) the return on assets is another profitability ratio that might interest creditors -- and both apply to Amazon more than they do to eBay.



The P/E ratio of Amazon is high. Its stock trades at a 189 P/E as of today, well over the average P/E for the Nasdaq, which is 24. Thus, Amazon is very expensive. The P/E ratio for eBay is much more in line with the average, sitting at 19. Thus, of the two, eBay is the less risky investment for a creditor according to this ratio.



The net profit margin ratio applied to Amazon shows that the company is becoming more profitable, thanks to cloud services -- but overall, the ratio is still dismal at a low 1.60% for….....

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References


Chevalier, J., Goolsbee, A. (2003). Measuring prices and price competition online:

Amazon.com and Barnesandnoble.com. Quantitative Marketing and Economics, 1(2): 203-222.

Curbera, F. et al. (2007). Bite: workflow composition for the web. Service-Oriented

Computing, 4749: 94-106.

Di Pietro, I. et al. (2009). Semantic web service selection at the process-level: the eBay/Amazon/Paypal case study. Web Intelligence and Intelligent Agent Technology. DOI: 10.1109/WIIAT.2008.237

Linden, G., Smith, B., York, J. (2003). Amazon.com recommendations: item-to-item collaborative filtering. IEEE Internet Computing, 7(1): 73-82.

Statt, N. (2016). Amazon's earning soar. The Verge. Retrieved from http://www.theverge.com/2016/4/28/11530336/amazon-q1-first-quarter-2016-earnings

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