When competition gets tough, it seems e-commerce giants are not above unscrupulous business practices. Ebay has had a tough business model, having slow growth and struggling to post a profit each year. Amazon in contrast has done well, posting consecutive earnings beats just in the last 4 quarters. Both however have taken on recent policy changes in attempts to get ahead, or stay ahead, respectively.
We got the chance to speak with one analyst who follows the space closely on what he believes are changes brought about by increased competition from traditional brick and mortar stores expansion efforts online. An excerpt from our client report:
“Talking to suppliers, retailers and users directly who use the platforms regularly you can get a much better handle on what the immediate objectives are for them[e-commerce marketplaces]. Whether it be growth via sales promotions and merchant fee reductions, or cost cutting by changing refund policies and even user interface changes.”
When asked what specific changes have been made at Ebay and Amazon our source said it was a mixed bag:
“Well, from the big players, there is less room for dramatic improvement. We’re on the lookout for many small but incremental changes. This is where we most commonly see a net positive for e-commerce marketplaces long term. Everything else tends to be a trade off. Actually, when big changes are implemented it’s often a mistake that they then have to then back off from. For example Amazon recently relaxed its supplier vetting to try and maintain market share, causing a slew of fake products being sold and inaccurate listings. It made a few headlines and Amazon had to compromise.”
In addition to existing competitors like Alibaba, brick and mortar stores like Walmart and Target have also been going after e-commerce giants. They have recently expanded listings and offered expedited shipping to match Amazon and Ebay. We asked what some examples of positive incremental changes are being made to stay ahead:
“Ebay has recently encouraged merchants to batch transactions, making order fulfillment more efficient. This might help reduce bandwidth cost and improve user experience. Although from our survey we found that the consolidated forms weren’t flexible enough. So, they had to go back to doing them individually. Also when we asked users what their pain points were, we found that Ebay has changed the UI to make refunds more difficult for cancelled orders and shipping. An example of a short term cash-grab at the risk of longer term merchant loss. Not a good sign.”
With the increased competition, it will be hard for Ebay to continue growing, unless it keeps users happy and maybe even takes a page out of Amazon’s playbook by investing in horizontal and vertical integration. Amazon has maintained it’s competitive edge domestically but does experience stiff competition abroad. It will be interesting to see what comes next for the two incumbent e-commerce giants.
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