How eBay is Planning to Improve Fulfillment & Challenge Amazon
By Ben Rudolph
Amazon versus eBay? Currently, not much competition exists. eBay has more than 180 million shoppers around the globe with $100 billion in sales on its marketplace. Yet, compare this to Amazon with more than $340 billion in e-commerce sales on Amazon Marketplace. As a refresher, there are two ways of selling on Amazon. Either Amazon purchases your inventory and resells it (first party sales) or you sell your products on Amazon Marketplace directly to customers and Amazon takes a cut of the sale. When considering all US online retail spend, the comparison between eBay and Amazon becomes less favourable. Amazon now controls 49.1% of all online retail spend versus eBay in a distant second-place at 6.6%.
One of Amazon’s strongest selling points - for both consumers and sellers - is Fulfillment by Amazon (FBA). Paired with its Prime Membership, Amazon’s fulfillment and delivery arm is able to offer guaranteed shipping and meet customer needs by offering some Amazon Marketplace items in its 2-day shipping offerings.
Where fulfillment represents a strong point for Amazon, it has been a pain-point for eBay due to its previous hands-off approach to delivering goods ordered on its marketplace; delivery is the responsibility of the individual merchants. As such, products bought on eBay can suffer from inconsistent delivery times, making it an after-thought for consumers who need a product ASAP. Holiday shopping exacerbates this problem when consumers become even more concerned with on-time delivery. As a result, some sellers on eBay’s marketplace actually use FBA to make their deliveries to customers!
In an effort to offer a better customer and seller experience - and better compete with Amazon - eBay will be rolling out “Managed Delivery”. Unlike Amazon, eBay will not build its own series of warehouses and transportation networks. Rather, it will use a series of third-party contractors for warehousing, packing, and shipping. eBay plans to roll out Managed Delivery in 2020 across its various geographic areas of service. It has said that it plans on trialing the new service throughout 2019 in select cities in the US, Germany, and the UK. eBay has stated that between 40% to 50% of its marketplace products will qualify for Managed Delivery.
Similar to FBA, sellers who opt into Managed Delivery will be charged a fee for warehousing and for shipment of products once the item is sold. eBay offers the example of David DiBartolomeo, a seller of smartphone cases on eBay. Currently, he runs his business out of his garage in New Jersey. If someone orders a case and lives in California, DiBartolomeo will pay $3.10 just for postage. With Managed Delivery, he will pay a flat-rate of $3.99 to ship anywhere in the country. While this costs more, with Managed Delivery, someone else will store, package, and ship his products. Many sellers are excited about the possibility of expanding their SKUs without having to store them in their own space. DiBartolomeo is participating during initial trials, and notes, “I can focus on running my business and adding products rather than packing boxes all day.”
Managed Delivery is the brainchild of eBay CEO, Devin Wenig. Wenig took over during a tepid time for eBay in 2015. That was the same year eBay split from PayPal and was facing severe pressure from investors over stagnant growth. Wenig says Managed Delivery aims to offer two-day shipping under the program but that eBay does not plan to enter a “fast shipping war”. Rather, he reiterates why shoppers and sellers chose eBay, saying they “shop on eBay because of the value and uniqueness of our inventory. We’re not the one-hour delivery guys. We’re never going to be that, but consumer expectations are changing.”
Should sellers and brands be looking to make the switch to eBay’s marketplace? I think so. In the meantime, eBay has less shoppers than Amazon, but it could see this trend reverse as shipping times and customer experience improve after the launch of Managed Delivery. Most importantly, eBay offers brands a pure online marketplace solution without having to partner with Amazon which may use your shopping data to directly compete with you by selling their own Amazon branded look-alike product.
Sources
https://www.theverge.com/2019/7/25/20727220/ebay-managed-delivery-fulfillment-service-amazon
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