Ebay and Amazon

4-19-13

Case Study: Ebay and Amazon

Question #1:  As it shifted to a retail and platform business model, how successful was Amazon in overcoming barriers to entry in the third-party seller market?  What business choices were critical in altering the competitive dynamic?

Amazon was very successful in overcoming barriers to entry in the third-party market. Amazon’s first barrier was how to incorporate third-party merchants into their business strategy. The idea of having a single store proposed Amazon selling their own products in the same area as third-party merchants. Amazon and the third-party would have their products being sold on the same page to give everyone a level playing field. Having everyone’s products side by side would create just as equal of a chance for third parties to sell their product as Amazon does. It’s a bold strategy, but it shows that Amazon is not afraid to flex their muscle against the competition. To keep track of things, general managers were put into place for each category store by keeping income statements reflecting Amazon and third-party sellers. Amazon literally put their competitors in a position to get the sale over themselves. This was something no other competitor was willing to do at the time. It was a power move by Amazon to show how superior their inventory and prices were compared with that of competitors. As if this wasn’t enough, Amazon then created the Fulfillment by Amazon service. This allowed third-party sellers to use Amazon’s distribution and warehouse centers. Third-parties were allowed to ship and store their products while using Amazon’s facilities and services. Granite Amazon made a portion of the sales off of this strategy, but once again they are aiding their competitors. Amazon was changing the face of e-commerce as we knew it. They were helping their competitors, but at the same time doing it in a way that brings their company a profit as well. Amazon was resetting the bar on e-commerce while leaving...