Amazon or eBay: Which Online Sales Platform is Best?
Whether you are expanding your brick-and-mortar into wider markets, or starting an online business from scratch, online marketplaces have much to offer. They provide access to a large customer-base, while also providing tools to list, promote, and sell products. But not all marketplaces are created equal; before you start selling online, there are important factors to consider.
Amazon is both its own retailer and a host for third-party sellers. Users can create Amazon Seller accounts, allowing them to list their products in the Amazon store. Sellers can access a suite of sophisticated marketing tools built into the Amazon framework. Amazon even offers fulfilment solutions, meaning that Sellers can offload most of the work to Amazon and invest that energy elsewhere.
Though it also hails from early internet days, eBay boasts only a fraction of Amazon’s users and market share. It also works slightly differently. First, eBay lists no products of its own, making it purely a 3rd-party market. Second, it functions primarily as an auction platform, though sellers can choose a fixed-price option instead.
Comparing the Two
Size and competition
While Amazon is many times larger than eBay, it is also increasingly saturated. You might compete with hundreds of other similar listings for recognition by Amazon’s algorithms. Amazon usually features the one or two most established listings in any given category, resulting in a winner-takes-most sales distribution.
In contrast, eBay does little to prioritize any given listings. And, due to its being an auction platform, users are often more inclined to compare several listings. This makes the platform less competitive overall, though sellers compete for a larger slice of a much smaller market.
Where Amazon perhaps shines the most is in its fulfilment program Fulfilment by Amazon (FBA). This optional service handles all the storage, packing, and shipping logistics on Sellers’ behalfs. While this service comes at a cost, the cost is competitive to that of handling logistics independently. Plus, the convenience can’t be beat.
eBay has no similar offering. After a transaction is made, the rest of the fulfilment process rests with the seller. This may be less of an issue for established businesses with existing logistics infrastructure than for new sellers with limited capital.
Amazon’s pricing structure is complex, but is generally more expensive than eBay’s. Sellers choose between a per transaction or a flat monthly fee. Sellers who fulfill their own orders pay a referral fee, which is a flat rate per transaction that varies based on category, and a closing fee, which is a percentage of the sales price.
FBA sellers pay all of the above fees, but also pay an FBA fee determined by the dimensions and weight of their listed products.
eBay charges a listing fee, called an insertion fee, and takes a percentage of the sales amount. Their fees are generally lower than Amazon’s, and sellers receive 50 free listings per month.
An online business is still a business, meaning local laws still apply. If you sell under a different name than your legal name, it will need to be registered.
Even though many sellers sell products sourced from a supplier, harms arising from products can still lead to liability for the seller. Incorporating your business can limit your personal liability, but is not an ideal solution for everyone. Barring incorporation, it may be wise to consider a Product Liability insurance policy.
For more information about starting an online business, please reach out to one of our lawyers.
-Shira Kalfa, BA, JD, Partner and Founder
Shira Kalfa is the founding partner of Kalfa Law. Shira’s practice is focused in corporate-commercial and tax law including corporate reorganizations, corporate restructuring, mergers and acquisitions, commercial financing, secured lending and transactional law. Shira graduated from York University achieving the highest academic accolade of Summa Cum Laude in 2012. She graduated from Western Law in 2015, with a specialization in business law. Shira is licensed to practice by the Law Society of Ontario. She is also a member of the Ontario Bar Association, the Canadian Tax Foundation, Women’s Law Association of Ontario, and the Toronto Jewish Law Society.
© Kalfa Law, 2021
The above provides information of a general nature only. This does not constitute legal advice. All transactions or circumstances vary, and specified legal advice is required to meet your particular needs. If you have a legal question you should consult with a lawyer.