Amazon vs. eBay

In an earlier post I recommended that, when you’re first starting an ecommerce business, you should start with either Amazon or eBay.  I’ve sold successfully on both, but they’re very different market places, and one may be a better fit for you.

eBay’s business is to bring customers to third party retailers, like you.  In fact, there is no ‘first party’ retailer on eBay, since eBay doesn’t sell products itself.  This is both good and bad.  On the good side, you’re not competing with a large retailer on their own website.  Buyers are naturally more comfortable buying from a large, established company than a small company they’ve never heard of, so competing directly against them puts you at a big disadvantage.  On the down side, eBay’s only means of making money from your business is the fees they charge you, which includes listing fees and the commission on your sales.  So what you get from eBay is pretty much limited to them bringing customers to you.   As a new e-tailer that’s the thing you likely need the most help with, so don’t underestimate it, but that’s it.

Amazon’s business is to sell products.  They let third party retailers sell on their site, but that isn’t their primary business.  Perhaps more important than the money they make on their commissions from your sales (they don’t charge a listing fees), having third party retailers on their site expands their product offerings, making Amazon a more appealing market in general for customers.  That increases sales of their own products as well.  The good side of this is that Amazon has an incentive to create programs that can make your business more successful, which they do.  Fulfillment By Amazon is an excellent example of this.  FBA is Amazon’s order fulfillment service.  You send your inventory to Amazon’s warehouses, and when someone buys your products from the Amazon website, Amazon ships it to the customer with no intervention at all on your part.  They also handle all customer interactions for FBA orders, like returns and exchanges.  The downside is that if you have a product that sells very well, eventually you’ll be competing directly against Amazon.  Of course, you’re competing against Amazon whether you sell on Amazon on not, it’s just more obvious to you when you see their listing next to yours.  It’s also true that when you have a product that sells well, it will attract a lot of competition other than Amazon, so Amazon selling it directly isn’t your only competitive threat.

Another difference between the two that I’ve noticed is how customers on each market place view retailers.  eBay is a bargain mentality, whereas Amazon is more of a traditional retail mentality.  For example, it’s very common for eBay customers to contact you asking for discounts on shipping, or on buying multiple items.  This is extremely rare on Amazon.  That difference may not seem like much, but customer interaction takes time.  If you’re a new, small retailer this bargaining will eat up time that could be spent on finding more products to sell, even if you just send an email that says there are no such discounts available.

Eventually you’ll probably want to sell on both eBay and Amazon; they can both bring a large number of customers to you without you having to spend anything on marketing.  You’ll want to choose just one of them to start with, until you’re able to sell successfully on it.

Random Observations

I was looking for an OEM to source a new product, and found several manufacturers that looked like they worked with small retailers on the type of product I was looking to sell.  I sent an email to each asking for additional information than what was on their websites.

Most of them didn’t respond.  It seems amazing to me that a company would advertise on their website that they provide a certain service, to customers whose profile I meet, and then they would not bother to even respond to an enquiry.  I make a point of always responding promptly to any customer (or potential customer) enquiry.  I never thought about this policy, it just seems like common sense to promptly respond to buyers.  Given this response rate, though, I thought I would recommend here that you always respond promptly (within hours) to any enquiry.

At any rate, one of the companies that did respond promptly was a manufacturer in India.  Their response stood out from the others in their thoroughness in answering every question I had asked, as well as their very clear instructions for moving forward if I was interested.  I wanted to purchase samples from them, since you can only tell so much from pictures on a website.  Their response had included detailed instructions for purchasing samples, so we were well on our way to making this a good relationship.

Then things went south.  The sales representative asked me to forgo the samples and make a purchase right away.  This is bad protocol.  I had asked to purchase samples (as he had outlined in his email), and he was trying to rush me into a purchase, sight unseen.  A manufacturer asking me to do this is a big red flag that the quality of the merchandise is poor.  I responded that I wanted to purchase samples; I’m not comfortable making even a modest purchase without seeing the merchandise first.  I’ve never purchased from a manufacturer in India before, so it’s possible this is just a cultural difference. 

I was very clear that a sample was necessary before I would consider placing an order.  Instead, he sent an email assuring me that their merchandise is very high quality, that they’re a large manufacturer with many name-brand customers, and asked me again to make a purchase right away.  These things may all be true, but they’re beside the point.  I won’t purchase from a new manufacturer without getting samples first.

I generally give a potential or actual business partner a second chance if things aren’t going well, but I rarely go beyond that, and I usually regret it when I do.  Unfortunately, I won’t be working with this particular manufacturer.  But I won’t let that deter me from trying to work with other overseas manufacturers; I just need to find the ones I’m comfortable working with.