MSN Finance: How Amazon is beating up eBay
Sep 13th, 2008 | By Max Leisten | Category: Amazon NewsAt MSN Finance, Michael Brush makes an interesting argument that Amazon will not only continue to take e-commerce market share from eBay but may also threaten PayPal’s leadership amongst checkout solutions available to online retailers.
The biggest significant source of growth inside eBay is the payment-services division known as PayPal. It’s used by eBay buyers and sellers, and by outside Web sites, to handle payments for purchases.
PayPal revenue jumped an impressive 34% last quarter, which explains why analysts such as Youssef Squali at Jefferies consider PayPal to be eBay’s jewel. PayPal contributed 26.4% of revenue in the quarter, up from 23.7% a year ago.
But late last month, Amazon began offering its payment technology to outside merchants for use at their own Web sites.
[...] Amazon’s system is easy and convenient, which should cut down on the number of buyers at partner sites who drop a purchase midway through because they get fed up with filling out forms. Customers can store data such as credit card numbers and addresses with Amazon and retrieve them at any store using their system.
CBA (Checkout By Amazon) delivers 80 million registered buyers and represents a significant incentive for online retailers to integrate CBA (registering and sharing payment details are big conversion barriers). Are you considering CBA for your checkout? Why? Why not?
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When I get my ecommerce site built, I will definitely be offering Amazon checkout (as well as Google and Paypal). With Amazon, in particular, people are already used to being able to use their Amazon checkout on other retail web sites — Target springs to mind. So, it’s a no-brainer to offer it to customers. I think it can inspire trust in buyers, since Amazon is a known and respected entity in the marketplace.
This is one of eBay’s biggest failings. They’re too busy flogging the sellers to take the time to find out what the problems are in the marketplace. Trust is a major reason why buyers won’t shop on eBay. Buyers need to be certain they won’t be taken for a ride by sellers and so far, eBay hasn’t done enough to fix that. They’re depending on the buyers’ ratings to weed out bad sellers instead of being more proactive in getting rid of them first. eBay needs to add some kind of seller qualification up front, before allowing anyone to list. Then they need to take ownership of the whole checkout process, just like Amazon has done. Integrate Paypal completely and make it seamless (and fast). Take ownership and responsibility for all of that, to protect buyers *and* sellers from the bad apples. Buyers and sellers both, are wary or Paypal and the blogs abound with tales of people losing their money because of them. Paypal makes you do back flips in order to qualify for either buyer or seller protection, so that really needs to change if they expect to beat out competing services like Amazon Checkout.
eBay made a little progress, but are focusing on the wrong things and aren’t tossing enough carrots to the smaller sellers who bring diversity to the marketplace. Give all of the sellers, not just the big powersellers, financial incentives to ship products quickly and provide great pricing and customer service, and then protect the transaction on both ends via Paypal. They might find that people might be more encouraged to do more buying and selling if they take all of that into account.
Definitely agree on Amazon Checkout delivering immediate trust (and improved conversions) to an e-commerce site. Of course it’s important to balance the increasing number of checkout options with buyer confusion — if you give them too many options they may end up walking away.
I believe eBay is working on the more seamless checkout that will deliver the shopping experience you’re describing and that Amazon has perfected. It of course started without a payment system and, in order to grow the marketplace, have given sellers a lot of flexibility on payment options. The restriction of no-paper-money in October is the first step towards streamlining this.