Amazon vs. eBay vs. Your Own Website: Pros and Cons of Different Marketplaces
For those getting involved in online selling, there are three main options for selling: Amazon, eBay, and your own website. Each has its own pros and cons, and it is important for the ongoing vitality of a business that it avail itself of all possibilities. Let’s take a brief look at some of the selling options.
Amazon is far and away the biggest online retailer (within the USA). According to MSNBC, it is expected that Amazon will top $250 billion in sales this year, or roughly 49.1% of all online sales. In short, Amazon sales will be roughly equivalent to all other online retail combined. Clearly it is the most important of these marketplaces.
Pros of selling on Amazon
Easy access to a wide swath of spenders
Forbes states that more than 50% of American households have access to an Amazon Prime membership. This is just subscribers, there are many more that do not have a Prime membership but still shop on Amazon.
Simple to get started
Amazon offers fulfilment by Amazon, or “FBA.” This means you can have items that you sell sent to Amazon, and when customers buy it, Amazon will package and send the item to the consumer, while also providing tracking numbers and other end to end customer service. This makes it easy to start your online store before you have a warehouse and fully fleshed out shipping and packaging operations. It is also relatively inexpensive, often much cheaper than it would cost for an individual to send out on their own.
Advertising is run through the same portal
When advertising on Amazon, one uses what is now called, “Amazon Advertising.” You can use this to setup broad automatic campaigns, or more targeted, specific campaigns. This allows you to have great control over your advertising budget, and you know that you are advertising to customers that are already fairly interested in buying a product.
There are lots of communities of support and tools to support research
AMZScout is widely considered the best extension for evaluating potential products. There are also other tools that help with streamlining advertising, and Reddit and the Sellers’ Forums provide places to ask questions and learn quickly about the Amazon sales opportunity.
Cons of selling on Amazon
It is a wildly competitive marketplace
There are more than two million sellers on Amazon, which means in many categories the competition is incredibly high. Without careful product selection, you can find yourself toiling away on the eighth or ninth page of a search, never to be seen by customers. Alternatively, you may find that the product prices get lower and lower, cutting into your margins and turning a good idea into a waste of money. Tools like the simplify this process so you can find successful Amazon FBA products quickly and easily.
The return policy is extremely beneficial for the customer
Amazon panders to their customers in a way almost no other retailer has done. The return policy is simple and easy. For most items, customers are refunded before ever returning the items they purchased. To stay on top of getting reimbursed, there are programs available to help track these returns and make sure the product is actually being returned to inventory.
Fees are high compared to many other options
Amazon charges a 15% referral fee on almost all purchases. This can quickly cut into your bottom line. If you are looking for hot selling products on Amazon, be sure to consider this fee. It’s easy when using because it comes with an easy to use FBA Fee calculator to help estimate your potential profits.
Amazon can be strict with their rules, and can suspend quickly
There are countless horror stories of successful sellers losing their entire Amazon business because they stepped over one of Amazon’s lines. It could be simple such as logging into the wrong Wifi, and can sometimes be blameless such as a competitor making false accusations to hurt your product.
Ebay is the second largest online retailer, but only has about 6% of the overall online market. To put this in perspective, it is roughly ⅛ of Amazon’s market. While this can still be a substantial amount, it is noticeably less than the sales found on Amazon.
Pros of selling on eBay
Ebay has lower fees
Ebay’s fees are changing at the end of September, and while increasing they will still be lower than Amazon’s fees. Ebay will be charging the higher of .75 or 7.5% for reserve price listings. This is half of Amazon’s fees, which can make a huge difference in your bottom line and the profitability of your products.
Ebay has fewer sellers
While once known for the abundance of different sellers peddling their wares, there are actually more independent sellers that make their primary income from Amazon than from eBay. It is estimated that only 1.3 million sellers rely on eBay for their main income. There are certainly far more ‘amateur sellers’ on eBay, but overall, the competition for fixed price products can be quite low.
Selling on eBay can a be loose environment
Ebay can be looser with the rules, which can allow a qualified seller to really stand out. When there are many poorly made or unprofessional looking listings it can be easy to excel. Use this to your advantage as a seller!
Cons of selling on eBay
There are fewer consumers on eBay
As noted above, it can be a less competitive environment largely because there are less buyers than on Amazon. A best selling product on eBay will typically gross far less than a best seller on Amazon.
Customer have less confidence in eBay
Ebay has an association with scams and lack of professionalism among many consumers. This can look bad for your brand when you are trying to make a name for yourself.
It can be harder to fulfil orders on eBay
Unless you fulfil orders using FBA (which is more expensive to use for a third party site like eBay), you will need your own packaging and shipping operation to sell on eBay. This can be a burden on your company, and immediately begins saddling you with overhead.
Your Own Website
As you begin to build your brand, establishing your own website can be an attractive option. It gives a certain weight to your products and brand, and can instill consumers with a higher degree of confidence.
Pros of selling though own website
Establish credibility for your brand
A website can give your products and brand a natural gravitas.
Lowest fees possible
The fees when selling on your own site will be minimal, typically a credit card processing fee and the cost of using a platform like Shopify, or something of the like.
Upsell other products
Once the customer is on your site, they may end up buying several different products. The ability to sell similar or connected products magnifies the need to establish a niche so you can sell multiple items in one fell swoop.
Cons of selling though own website
Must bring customers to you!
When you start your own site, you don’t have the benefit of millions of customers already looking on your platform to make purchases. You must invest time, money, and energy to build up your search ranking on Google and other search engines.
Advertising can be expensive
Running ads for a broader subset of the population on a search engine like Yahoo or Google can be much more expensive. Additionally, the conversion rate is often times much lower.
Customer service can be difficult
When running sales through your own site you will need to be constantly cognizant of customer service issues, technical issues, and anything and everything else that may pop up.
As a seller, the question is always, “So What?” How does one apply this knowledge in a concrete way to help with their business model. Here are your main takeaways:
Pick an initial platform for getting started. Amazon and Ebay are great places to start since they come with a vetted customer base. This saves you time and money drawing traffic in the early stages.
Look to expand your business both vertically and horizontally. This means expand by both adding products, and by adding marketplaces. This type of growth will help lead to long term success.
Be cognizant of which products can succeed on which marketplaces. For instance, some technical goods and replacement parts actually do sell better on Ebay than Amazon.
Leverage your success into a private website. Once you see the potential of some products within the same niche, find an appropriate website to help legitimize your brand and begin to make sales with a lower referral fee.