How did Amazon beat eBay?

A follow-up to Notes on eBoys.

It’s hard to read eBoys without wondering how Amazon beat eBay. Amazon was already a significant player in the late 90s, but it hadn’t entered the third-party marketplace space yet. Everything came through Amazon. Bezos and co didn’t even enter that space until after they were approached by eBay for a partnership.

It may seem obvious in retrospect that Amazon would win. They’ve since shaken so many industries, they look like the most dominant company in the world (Chinese businesses have their own risks), of course they would win.

eBay succeeded by fostering community. It’s founder, Pierre Omidyar, is always talking about community in eBoys, and this concept is credited with eBays success over competing auction sites. Being a direct seller is a very different business from running a marketplace. Amazon had to set customer expectations for both their own selling and other companies selling on the same platform. Different delivery systems, timelines, products, and on top of that managing the risk of other sellers eating your own lunch. Of course, if you don’t let customers buy enough from other sellers, there’s the risk they’ll leave your platform. Yes, they had the demand side of the marketplace already, but there are many problems to solve making sellers happy.

Amazon winning markets is almost expected. When Amazon announced they were considering entering the healthcare space, the markets shook. It’s still shocking how effectively they knocked down eBay, the perfect internet business. 90% margins, consistent organic growth on both supply and demand side, all eBay had to do was support and take of cut of this new internet wave.

Amazon’s story for why they won comes down to giving sellers a better experience. From Bezos’ congressional testimony.

And it is striking to remember how recent all of this is. We did not start out as the largest marketplace — eBay was many times our size. It was only by focusing on supporting sellers and giving them the best tools we could invent that we were able to succeed and eventually surpass eBay.

“One such tool is Fulfillment by Amazon, which enables our third-party sellers to stow their inventory in our fulfillment centers, and we take on all logistics, customer service, and product returns.

“By dramatically simplifying all of those challenging aspects of the selling experience in a cost-effective way, we have helped many thousands of sellers grow their businesses on Amazon.

Trolling articles and comments for sellers comparing Amazon vs eBay, mostly what sellers seem to want is $. Convenience is cool, but people are trying to make a living, which focuses on sales. While Amazon’s penchant for heavy investments that margin-loving eBay balked at helped, it’s worth looking at the other side of the marketplace. There’s also a surprising amount of anger at Meg Whitman, although it’s not obvious to me why. Saw more than one comment along the theme of she “stopped respecting sellers”. I am skeptical this had a big impact.

Prime. Amazon has far more Prime Subscribers than Ebay even has users. Beyond the sheer numbers, Prime users tended to be the highest value customers, and Amazon made deep investments on keeping them from looking to buy anywhere else. Sellers need to sell, and Amazon did a great job attracting the best buyers.

Anecdotally, there’s also a “jobs to be done” framework rationale for Amazon’s success. Beyond Prime, Amazon did a great job at having the best selection, even for non-Prime users. As a child of the 90s, Amazon felt like something that could be relied upon for consumable basics soccer mom’s wanted, and eBay’s bran was moreBeanie Babies and collectables. The brand doesn’t exactly match the reality, but knowing Amazon being the brand leader of “stuff I need”, not just “stuff I want”, feels potentially powerful. Amazon works for most consumers, most of the time.

If anyone loston the internet happens to have insight on the real answer to this, I would love to hear it! This is largely conjecture.