AMAZON VS. EBAY
eBay vs. Amazon
Both Amazon and eBay have carved out significant niches in the online retailing world but they have done it strikingly different ways. However, despite these differences they are very similar in many ways including the legal, political and other struggles they face. This report will cover all of those in fairly deep detail. Topics to be covered will include a profile for each, stock performance in the recent past as well as with the initial public offering, three news events that the companies are facing, an overall financial analysis of each company, the accuracy/reliability of the data and lastly a recommendation of which company is in a more solid position financially and is best built for future performance (Yahoo Finance, 2012).
Company Profiles
Amazon and eBay are certainly both in the online-only retail sector, but they approach the sector through very different business models. Amazon sells many to most of the very same goods that one can buy from local grocers such as Kroger Inc. And Wal-Mart. Amazon does a lot of its own order fulfillment but farms out a lot of that to vendors and even some personal sellers who offer their goods through Amazon but at the price of Amazon getting a small cut since they are providing the website (Yahoo Finance, 2012).
eBay is different in that while they allow sales and such from established external retailers, they themselves to do not sell anything directly to consumers. Eveyrone that lists items on eBay is generally someone that has nothing to do with eBay directly and is simply using the eBay site as a sort of online classifieds. In other words, Amazon sells their wares personally through their own means, via "stores" of companies like Microsoft and from personal sellers. eBay only does the latter two of those three.
As for their histories, both companies were created in the mid-1990's. Amazon is based in Seattle whereas eBay is based in San Jose, CA (Yahoo Finance, 2012). eBay has nearly 28 thousand employees whereas Amazon is pushing 60,000. Both firms share similar, but not the same, competitors. Amazon's competitors are listed on Yahoo Finance as Barnes and Nobles (since Amazon's bread and butter started out as books), Apple (due mostly to the Kindle Fire vs. iPad competition) and other mail order and catalog ventures. One could make a case that firms like Wal-Mart, Target and Best Buy are also competitors (Yahoo Finance, 2012).
As for eBay, their direct competitors are a bit different since their service methodology is also different. Yahoo Finance lists eBay's competitors are Amazon, Google, Overstock.com and a few other mail order/catalog retailer players. eBay's overall revenues are far lower than Amazon ($57.26 billion) and Google ($47.54 billion) while eBay is at neatly $13.5 billion. Also as noted on the competitor charge, both Amazon and Google are growing much faster than eBay, so the gap is growing. As of the last measurement, eBay was growing at 15% while Amazon (27%) and Google (45%) were/are growing much faster. While the companies all share very common threads in what they sell and do, all three of them (Amazon and eBay directly compared included) are all very different companies.
Stock Compare
The stock prices for eBay and Amazon have both performed well overall over time and both took a hit during the 2007/2008 global recession but both recovered nicely. However, the paths they've taken independent of that are very different. As of the writing of this report, eBay sits at just over fifty dollars ($50.36/share) while Amazon is at very close to five times that ($249.19) (Yahoo, 2012)
As for where stock prices were at the time of IPO and the beginning of each of the last three calendar years, clear trends show themselves. Amazon's IPO price was very little (barely a buck or so) but its price has done beautifully since then. As of January 1st, 2010, Amazon's stock price was at about $120/share. As of January 1st, 2011, it was $175/share and it was a bit higher than that as of January 1st, 2012, resting at about $195/share. Amazon's started low and languished a bit until the tech boom of 1999/2000 and then bottomed again and roughly stayed there until the post-recession times after 9/11 and the recession that occurred at the same time. Since the stock started rising in 2003, the stock has generally trended sharply upward except...
Not all that dissimilar from Amazon, eBay's fortunes (and stock price) rose quite sharply from 2003 to 2005, going as high as $60/share (somewhere the price has not gone since), bottomed out sharply (which a few peaks in between) from 2006 to 2009 and then has solidly recovered to get back up to $50, where it is not. As of Jaunary 1st, 2010, the stock price was $25/share. As of January 1st, 2012, it had reached $30 a share. As of January 1st, 2012, the stock price was still at $30 a share, as it had bouned back and forth between $27 or so a share from January 2011 and $35 for the calendar year prior. That being said, the price has steadily risen since then, going up $20 from January 2012 to the present (Yahoo, 2012).
News Issues for Amazon & eBay
One major issue that affects Amazon (but also pertains to eBay as well) is the issue of sales tax collection. In general terms, if a company in one state sells a product to someone in the same state, the retailer is generally compelled to collect sales tax. For example, if Amazon (which is in Washington state) sells to a buyer that is also in Washington state, they are legally compelled to collect sales tax. However, if they sell to someone in Colorado, that is no longer the case. The burden to report the sales tax has fallen on the buyer much more than the seller in a multi-state scenario. Several states have shifted the relevant laws greatly since this has become an issue over the last few years, but the buyer typically still bears the burden even if many politicians say that Amazon should be doing so even though it has no legal compulsion to do so (Yang, 2009)("Connecticut joins calls," 2011).
As noted above, several different states are making calls for Amazon to collect and pay the tax. The states that have done this include California, Texas and Connecticut. For example, Connecticut has implemented a law requiring online retailers to collect tax but Amazon states that they are not subject to that law since they do not have a physical presence in that state and, therefore, the state of Connecticut has no authority to make them pay anything. This all being said, Amazon has inoculated itself from a challenge to that statement given that they have intentionally and completely cut ties with any official vendors and distributors that operate in that state. Amazon has held the stance that the buyers bear the burden in such a situation and that the state should deal with them. The only single jurisdiction that would have unquestioned authority to handle this subject would be the federal government but there is no movement on implementing such a law at this time (Yang, 2009)("Connecticut joins calls," 2011).
The dynamic that leads to the above causes the same headaches with eBay, but to a lesser extent from an actual standpoint and it has more to do with purchasing certain goods online. One such good would be vehicles such as tractors. Buying something as significant (and pricey) as a tractor or a precious stone has a lot of implications due to the fact that the buyer and seller are greatly separated from a geographical standpoint and the purchase is often executed (or at least partially secured by a deposit) before the buyer even sees or feels the product in person. As such, the normal protocols of how to execute the transaction at a high level are entirely different and eBay has had to adjust its practices and conflict resolution framework to protect both the buyer and the seller from harm (Diekmann, Roe & Batte, 2008). eBay has also had to deal with patent laws relative to the technologies and methods they use to sell their wares. One such spat was between eBay and MercExchange LLC. A pertinent question that came from that (and similar) cases is whether permanent injunctions can (or should) be used to stop patent infringement (Mulder, 2007).
To summarize all of the issues above, it is clear that Amazon and eBay are both causing an extreme amount of "new ground" to be plowed in the subjects of contract law, retailing rules/regulations and best practices and where the burden should fall for tax payments. In short, the author of this…
