Ebay Vs Amazon Essay

3042 Words Mar 20th, 2014 13 Pages
Amazon and Ebay are two well-known brands of online shopping sites. They have evolved and grown from small firms to the giants of e-commerce today. In this essay, a comparison would be made between the two firms.
Questioning the types of business models Amazon and Ebay’s have employed and how they have evolved over time, the driving factors of change, and finally the future outlook of each firm help distinguish the trails both firms made to become the two leaders in the market of ecommerce. They are imperative in making a comparison between the two because despite being direct competitors in the same market, Amazon and Ebay’s business models are distinctly different. Both companies have altered business strategies over
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(Hansell, 1999) Such reinforcing mechanisms are an example of direct network effects of using a merchant platform model.
Amazon also introduced its Auction system in 1999.This placed it in direct competition with Ebay, already a very established auction house “with a market value of nearly $20billion” (Hansell, 1999). Despite its risk, Amazon intends to have a slice of that market share, hoping to bring its 8 million users on board with this. (Hansell, 1999) This would create a separate option of its usual fixed pricing as auction provides an outlet for dynamic prices not only helps capture a wider range of consumers and add traffic but also provide a way “to get the most from overstocks and returns” and provide higher “gross margins”. (Hof and Himelstein, 1999)
However more importantly, it helped move Amazon into a two-sided platform. It did away with the chicken-and-egg problem having both sellers and buyers already on board its merchant platform. The incentives of this would be the positive feedback loops of indirect network effects. As sellers and buyers interact and grow, the value of one group to another grows and a by-product of this is Amazon becoming a more valuable platform to each group as well. Amazon then starts to lock in each group of its platform as switching costs become higher. (Salehnejad, 2012) It is not dissimilar to

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