eBay Inc (EBAY) Is Ready to Challenge Amazon.com, Inc. (AMZN)’s Dominance

Maybe, kind of
It won’t be a clear-cut case of lower fees wins out. Sellers have preferred Amazon for a number of reasons, including its better reputation for quality and authenticity, all-in-one pricing schemes, seller protection, and higher sales prices. By becoming a somewhat less expensive outlet, eBay has not eliminated all of its sellers’ concerns. Also, eBay Inc (NASDAQ:EBAY)’s fees do not include PayPal processing fees, which narrow the gap between Amazon and eBay pricing.

This may appeal to e-store newcomers, who will be shopping both options closely and may sway in favor of eBay’s new fee schedule. Buyers love eBay for the potential to get a real bargain — something that Amazon cannot often offer. This dedicated audience gives eBay a unique proposition to sellers, even if they may not get top-dollar for their items.

How much of Amazon’s current marketplace will be convinced to switch over? It will be interesting to see. I do not think, by any means, that there will be a mass exodus. Established Amazon.com, Inc. (NASDAQ:AMZN) sellers will not be eager to close up their e-shops to move next door for marginally lower rates (except maybe antique Rolex stores).

But, the thing is, eBay Inc (NASDAQ:EBAY) doesn’t need tremendous marketplace growth like Amazon does. It has PayPal, which is the Ol’ Bessie of cash cows. Though on its surface, eBay is the go-to online auction house and seller of stuff you hope is what it says it is, it is really a play on payment processing and security. PayPal is far and away the greatest at what it does. By keeping its marketplace growing comfortably, it’s enough to make the company increasingly profitable and attractive to investors.

Who benefits the most?
In this move, it probably isn’t the sellers who are winning big, but the company. eBay Inc (NASDAQ:EBAY) has little downside risk, here, if any. The company has a chance to further its reputation as an outlet for sellers, and make a mint on multiple ends — subscriptions, listings, and payment processing. Amazon.com, Inc. (NASDAQ:AMZN) is the one at risk of losing market share, and as mentioned, it needs big-time marketplace growth to keep margins propped up, bottom lines juicy, and investors satisfied.

The coming quarters will be interesting for both companies. Investors ought to keep a close eye on marketplace numbers to see just how this will affect the businesses.

The article eBay Is Ready to Challenge Amazon’s Dominance originally appeared on Fool.com.

Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, eBay, and Google Inc (NASDAQ:GOOG). The Motley Fool owns shares of Amazon.com, eBay, and Google.

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