Amazon vs eBay: how each of these companies makes money.

 eBay vs. Amazon: An Overview

Whether you list things while at home in your pajamas, have money sent directly to you, or drop packages off in the mail, using eBay or Amazon is easier than the yard sales of yesteryear. But which major e-commerce site is best? It might help to understand how each of these companies makes money.

Listing on Amazon allows buyers to purchase right from the Amazon website and sellers can even have Amazon fulfil the order if they choose to have it stored at one of the Amazon warehouses.

eBay offers more customized listings, as well as the ability to have eBay employees put together listings for sellers.

Getting paid from Amazon as a seller involves having money deposited directly into your bank account, while eBay still uses PayPal for the most part. In addition, customers pay you directly.

eBay

eBay has snapped up quite a few companies since it first launched in 1995, including PayPal (which it acquired in 2002 and then later spun off in 2015), Gumtree, and StubHub, and had 138 million active buyers as of the third quarter of 2022.

So how does eBay make money? First, and most importantly, are transaction fees that can easily cut into a seller's margins with a 2.99% + $0.49 fee for each credit/debit card payment received.

eBay's Marketplace, where sellers can list items for sale or auction, also charge some users an insertion fee to list based on the item's starting bid and a final value fee when the item is sold. Today, every seller on eBay gets several free listings before these insertion fees kick in.

For example, If you have an eBay store, you'll receive more fee-free listings per month, while those sellers who do not have an eBay store subscription would have less. However, eBay still charges all sellers a final value fee. The variable final value fee depends on the item category and the amount of the sale plus $0.30 per order.

For power sellers, eBay offers subscription packages that give sellers several free listings for a monthly fee, a lower insertion fee for sellers who go over their allotment, and a less-simplified but lower range of final value fees. With the Marketplace, sellers can upgrade their listings (better placement in the search results, more pictures, etc.) or list their items at a fixed price. Fixed-price listings are subject to the same fees as auction listings.

Amazon

Amazon has an even more complex fee structure than eBay. The company offers two options for sellers: they can either list as Individuals or as Professionals. 

For Individuals, Amazon charges $0.99 per item to list along with a referral fee that ranges from 8%–45% depending on the item’s listing category.

On top of that, there is a variable closing fee which, for BMDV (books, media, DVD, and video) items, is not variable at all, at a fixed $1.80 per item. Other products are charged a variable closing fee that is calculated by the item’s weight.

Sellers can list their items among several different categories from books to beauty products to major appliances (some of which require Amazon's approval to list).

BMDV sellers have set shipping rates set and collected by Amazon. These fixed shipping rates are great for buyers who know that, when purchasing BMDV items on Amazon, the total price can be easily calculated without searching for individual sellers’ shipping rates.

Amazon allows those selling products already listed on the site to list their product simply by entering the item’s UPC or SKU number.

This process cuts down on the time a seller needs to prepare a listing because the relevant information has already been input by Amazon employees. Payment is completed by periodic bank transfers to the seller’s account, and sellers are protected by Amazon’s Fraud Protection service.

Key Differences

Amazon does has a few advantages over eBay. For starters, the site does an excellent job of making a buyer feel that they are buying directly from Amazon. The seller’s items are listed alongside Amazon’s. Purchases can be made using “1-click buying,” Unlike eBay and PayPal, buyers can complete their payment without leaving the Amazon site. With Fulfillment by Amazon, sellers can even have their items stored and shipped directly from Amazon’s warehouses.

On the other hand, a seller might prefer to use eBay to customize and personalize their listings. With the ability to post catchy full-color ads within a listing, it might be more appealing and more likely to result in a sale than Amazon’s neutral listings.

How to Get Paid

Amazon has a multi-step procedure to set up a seller’s account. Users are automatically signed up for a Professional account and Fulfillment by Amazon. Account information is input based on a user’s existing account (if any). Finally, there’s a section for Tax Identity Information.

For eBay sellers, the process is simple—open an eBay account (or use an existing one) and start selling. Both eBay and Amazon users get paid via a direct deposit to their bank account.

Advantages and Disadvantages of Selling on eBay

Selling on eBay can be an easy way to earn money off of things you no longer use (gently loved toys or in-the-box collectable items, for example) or a way to sell what you make (Halloween costumes and Christmas decorations). Most shoppers and sellers are familiar with eBay, and its search engine makes it simple to find what you need on its platform.

There are, however, disadvantages to using eBay versus other online selling platforms. First, you will have to pay eBay fees for using its platform, you have limited control over how items are sold, and you may end up with payment issues if customers don't pay you.

Pros

• eBay has a global reach.
• Setting up an eBay account is pretty straightforward.
• Selling on eBay is one way to make money on the side.

Cons

• You have to pay fees, and those fee structures may change over time.
• You have to compete with similar sellers.
• You may run the risk of not ending up paid for your items, if a customer doesn't pay.