Comparaison d'Amazone et eBay (document en anglais)

A Comparative Analysis of eBay and Amazon 29

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Chapter III

A Comparative Analysis

of eBay and Amazon

Sandeep Krishnamurthy

University of Washington, USA

ABSTRACT

Even though Amazon.com has received most of the hype and publicity surrounding ecommerce,

eBay has quietly built an innovative business truly suited to the

Internet. Initially, Amazon sought to merely replicate a catalog business model online. Its

technology may have been innovative- but its business model was not. On the other

hand, eBay recognized the unique nature of the Internet and enabled both buying and

selling online with spectacular results. Its auction format was a winner. eBay also

clearly demonstrated that profits do not have to come in the way of growth. Amazon was

initially focused on BN.com as a competitor. Over time, Amazon came to

recognize eBay as the competitor. Its initial foray into auctions was a spectacular

failure. Now, Amazon is trying to compete with eBay by facilitating selling and

strengthening its affiliates program.

INTRODUCTION

It is odd in some ways to be comparing Amazon and eBay. To most people, Amazon

is a retailer selling products to consumers and eBay is an auction house where consumers

congregate to sell to one another. However, a keen analysis reveals that these two

companies are direct competitors. For instance, the only site to receive more visitors than

Amazon during the 2002 holiday season was eBay. It is now well known that Amazon

considers eBay to be its biggest competitor.

30 Krishnamurthy

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permission of Idea Group Inc. is prohibited.

Amazon.com is perhaps the company that is most closely tied with the e-Commerce

phenomenon. The Seattle, Washington based company has grown from a book seller to

a virtual Wal-Mart of the Web selling products as diverse as music CDs, cookware, toys,

games, tools and hardware. At the same time, the company now offers selling services

either through auctions or by a fixed-price format. The company has also become a major

provider of technology to partners such as Toys ’R Us and Target.

Amazon has grown at a tremendous rate with revenues rising from about $150 million

in 1997 to $3.9 billion in 2002. However, the rise in revenue has led to a commensurate

increase in operating losses. At the end of 2002, the company had a deficit (i.e.,

cumulative losses) in excess of $3 billion.

On the other hand, eBay has had a focused and slower growth path. The core nature

of the company’s business has always been auctions. Even though the company has

grown rapidly, it is still a relatively small company with revenues of about $750 million.

Starting with the Initial Public Offerings (or IPOs), the stock trajectories of Amazon

and eBay have provided an interesting contrast. On the first day of its IPO, Amazon’s

stock rose from the target price of $18 to $30. In a strange coincidence, eBay shares were

also priced at $18. However, the closing price was much higher—$47.37.

Since then, the stock prices have gone in opposite directions (see Figures 1 and 2).

Amazon’s share price path is perhaps the biggest symbol of the rise and fall of the dotcoms.

On the other hand, eBay’s steady price path reflects the consistent profitability

of the company. Amazon.com has never had an entire year that was profitable. It has been

profitable in the fourth quarter of 2001 and 2002. The stock prices clearly reflect this.

While Amazon had the glamour of growth in sales revenue, eBay was the steady

plodder that nobody noticed in the initial years. Most dot-coms wanted to replicate the

model of Amazon. It was very common for a dot-com start-up to proclaim that it wanted

to be “the Amazon of XYZ” product category. Pets.com wanted to be the Amazon of pet

food, for instance.

Fundamentally, these two companies provide us with two interesting models of how

to grow a company. Bezos, the founder of Amazon, has famously argued that excessive

Figure 1. Amazon.com’s Stock Price Path.

Source: Quicken.com, Accessed on March 17, 2003

A Comparative Analysis of eBay and Amazon 31

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permission of Idea Group Inc. is prohibited.

focus on profits would detract from growth. In his view, growth must come first and

profits can come later. This

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