eBay vs. Amazon: The business models.


Way back in 1999, Business week published an article that pitted A&E against each other. It's an interesting read and surprisingly accurate of the situation as it still exists.

eBay vs. Amazon: Fixed prices or dynamic pricing? 

That's one thing Amazon and eBay agree on. There isn't much evidence that consumers want to ''one-stop shop for every single thing in their life at one company,'' says eBay CEO Margaret C. Whitman. And Bezos rejects the widely held notion that a handful of megastores will dominate. ''There's going to be tens of thousands of winners,'' he says...
...eBay has zoomed to prominence with an even more innovative E-commerce model--one that, in a rare feat, is actually profitable. Because eBay doesn't take possession of the goods--it acts as a broker for buyers and sellers and takes 6% off the top--it incurs none of Amazon's hefty distribution costs. It has only 198 employees to Amazon's 3,000. As a result, its gross profit margins are a Microsoft-like 85%--on gross merchandise that ballooned from $95 million in 1997 to $746 million in 1998. ''Dollar for dollar, eBay has a better revenue and bottom-line model,'' says analyst Mitchell Bartlett of Minneapolis investment bank Dain Rauscher Wessels.

And then there's this sentence that turned my head since this is exactly what we're aiming to do.

Moreover, eBay could even turn the nation's 18 million small businesses into a virtual selling force that could rival that of conventional retail. ''It could be the destination for all these businesses to sell online,'' says Steven R. Mitgang, a senior vice-president for Sitematic Corp., a San Diego software company that has helped several dozen small businesses list their inventory on eBay. Beyond auctions, says Mitgang, ''it has a huge opportunity to become the destination for consumers to buy stuff, period.''

Of course I think that Amazon, eBay, Google, and Yahoo are built bass ackwards for accomplishing this as top down search and retail. But what do I know... Shmula has all the charts.