Amazon Vs. Ebay: A Case Study In Business Models

On June 4, 2020, eBay (EBAY) released a business update to make investors aware that the quarantine circumstances have caused their business to perform “significantly better than expectations”, compared to their earnings report on April 29, 2020. Here is what they shared:

  • Strength in global gross merchandise volume (GMV) seen in April has continued through May, and the Company now expects full Q2 volume growth rates to land between 23% and 26% as compared to the prior-year period.
  • All major verticals are accelerating significantly compared to previous quarters, including Home & Garden, Electronics, Fashion, Auto Parts, and Collectibles.
  • Demand strength is driven by increased organic traffic, better marketing efficiency, and higher platform conversion.
  • Active buyer growth is accelerating, with approximately 6 million new and reactivated buyers added in April and May.
  • More sellers are joining eBay through efforts like Up & Running. Since March 2020, tens of thousands of small business sellers have been added to the platform.
  • Classifieds revenues are performing at the high end of previous expectations disclosed on the Q1 earnings call with automotive subscription revenues recovering as dealerships reopen across international markets.

Contrast this update with what the CEO of Amazon (AMZN), Jeff Bezos, said about first-quarter results:

Amazon expects to spend $4 billion or more — the predicted operating profit for the company’s entire coming quarter — just on COVID-19-related expenses. In a quarterly earnings release today, Amazon CEO Jeff Bezos said the expenses will come from spending on personal protective equipment (PPE), cleaning for facilities, “higher wages for hourly teams,” and expanding its own COVID-19 testing capabilities.

This got us thinking about business models and how profitable they can be. These companies are in e-commerce and have had the state governments of the U.S. shut down most of the physical locations of their competitors. The last three months were effectively two Christmas selling seasons spread from late winter into spring. Why is one of these business models responding so well to these circumstances? How profitable have these two platforms been in the past? Why does EBAY sell for such a steep discount to AMZN?

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Disclosure: This article contains information and opinions based on data obtained from reliable sources, which is current as of the publication date, and does not constitute a recommendation ...

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Adam Reynolds 1 year ago Member's comment

#Ebay and #Amazon need to do more to stop those engaging in price gouging for hard to find PPE products. When hand sanitizer is $70 a bottle, something is wrong! $EBAY $AMZN.