Third Party Sellers Moving From eBay to Amazon

3P stands for third party sellers. They used to be called "eBay sellers" but oh, how times have changed. 3P sellers are being credited for the resurgence in Amazon's (AMZN) share price as well as the company's revenues and, more importantly, profit. More and more 3P sellers are looking for the exits in regards to eBay (EBAY).

The marketplace dynamics are changing. eBay underestimated their hold on sellers and Amazon was there to woo them. Now a strange phenomenon is taking place. The type of product many 3P sellers are selling on eBay is trending toward end of life, liquidation, etc. Many 3P sellers are now using eBay for capital recovery while the lion share of their product is being purchased on Amazon at a higher margin. The IT has moved and continues to move to Amazon from eBay.

Why are 3P sellers shifting their mix of product to Amazon?

• Amazon wants them there, or at least acts like they do. Not all sellers are happy with Amazon but far more are upset with eBay. eBay management pushed sellers too hard and the result of that is showing itself in the migration. The problem is once the genie is out of the bottle its hard to get him back in. So eBay has to run promos to drive listings.
• Higher ASPs: 3P sellers know the percent they will pay Amazon on the backend and they can calculate the number in their pricing. Because of listing fees on eBay, if conversion decreases then marketing expenses can accelerate as a percentage of sales, therefore affecting profit margins.
• Customer Service: Buying on eBay is plain and simply too much work. Customer service emails are 100 times more on eBay than on Amazon. eBay buyers want the lowest price yet they want Nordstrom's (JWN) service (last time I checked Nordstrom wasn't considered a discounter) while Amazon customers want a fair price with Amazon service and reputation.
• Constant turmoil and business plan changes on eBay and minimal changes or business disruptions on Amazon.
• Amazon is a retailer (wow, so are 3P sellers) and eBay is a marketplace promoter that has a history of soaking its clients.

These are just a few of the reasons 3P sellers are migrating over to Amazon; as they open up new categories, 3P sales will continue to be the main driver behind Amazon's growth and profits. Imagine an Amazon where 60% of their business is 3P and they benefit from the profit margins that business brings, allowing them to fine-tune their own retail operations.

EBAY/AMZN 1-yr comparison chart

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Comments

[Carl leason:]

I can readily agree with the reasons for peoples dissatisfaction with ebay. The first and only time I had put an offer on an ebay item, it was a high bid, then I ws out bid, then I got an email saying I was the high bidder again, and I couldn't get ebay to understand that I was no longer interested when I was told that I was outbid. !
There had to be at least a dozen emails from the people at ebay and from the seller ,...the seller saying that he understood and would not ask me to buy the item, but ebay was pushing me to go ahead with the purchase, time and time again !
I got so disgusted with ebay that I put a block on their messages ! Told them to take me off their list , permanently !
With Amazon, I am always treated better than I expect ! Their site is easy to navigate and I am a loyal customer ! Screw ebay !!!

2007 Oct 30 12:38 AM

[24K Store:]

You may be interested in knowing that when we applied to sell on Amazon we received a form letter advising us that the "Categories you are interested in are closed" - We contact Investor relations, they where unaware, we then contacted VP Sales - he was unaware. I have since then sold over 180K Shares. A company that turns away paying customers is not what I consider a good business. Just an FYI for you. H Klasson CEO

2007 Nov 03 11:55 AM

[teggyturbo:]

Remember to keep your eggs in many baskets. I remember one of the biggest promotions I have ever seen on eBay was listing your car for $0! -

Too bad I missed this opportunity, I was considering approaching some used car dealerships and offering to list their cars for a commission or referral fee. eBay gives you way too short a notice though for the promotions, and they all last 1 day!

2008 Jan 22 02:17 AM