Amazon Growing Faster than Online Sector

Greater variety, lower costs give Amazon an edge over eBay, say analysts.

by staff writer
- Apr 28, 2009

Although people seem to be tightening their purse strings during the economic recession, at least one retail site remains popular with online shoppers: Amazon saw sales rise during the first quarter of 2009, while eBay reported its second revenue decline in a row.

Amazon's net sales increased 18 percent to $4.89 billion. Net income jumped 24 percent to $177 million. eBay, on the other hand, experienced a revenue decline of 8 percent to $2.02 billion.

Revenue from online marketplaces in general declined 18 percent during the first quarter, compared to the same quarter a year ago. Overstock reported a revenue decline of 8 percent during its first quarter, and a net loss of $2.1 million.

It appears, for now at least, that Amazon can do no wrong.

"[Amazon's] firing on all cylinders," says Dan Geiman, an analyst for McAdams Wright Ragen, in reports. "They've kind of developed that critical mass and they have a large enough customer base and enough products—it's kind of this virtual circle they've talked about. It leads them to higher and higher sales even when the economy's weak. It's another good quarter for them in all respects."

Amazon is benefitting from "lower product sourcing costs and increased product selection through its strong third-party merchant business," reports Jeetil Patel, an analyst for Deutsche Bank.

The site is experiencing the highest growth in the Internet sector, Patel notes. And its U.S. business is growing faster than overall e-commerce, adds Steve Weinstein of Pacific Crest Securities.

The number of users who frequent Amazon has also increased, while eBay struggles to keep users. In March, Amazon had 61 million visitors, up from 50 million last year. In the same month, eBay had 70 million visitors—10 million fewer than a year ago.

Why does the market appear to favor Amazon over eBay?

"eBay's marketplace business is in turmoil and traffic is down, due in part to a constantly changing shopping experience," Ina Steiner, AuctionBytes editor and co-founder, says in reports. "The question for sellers is whether it's worth the effort to figure out eBay's constant changes, or invest their time and resources elsewhere."

She notes the changes have caused many sellers to look to other venues to sell their goods.

"Thirty-two percent of's unit sales came from third-party sellers, many cherry-picked directly from eBay," Steiner says. "eBay isn't going away, but it's a very different venue on which to sell than just a few years ago, and it's headed in a direction where soon, only the largest merchants will feel comfortable selling there."

Amazon CEO Jeff Bezos attributed a large portion of the company's growth to the popularity of the company's Kindle 2 digital book reader.

"We're grateful and excited that Kindle sales have exceeded our most optimistic expectations," Bezos says.

Amazon expects second-quarter revenue to reach between $4.3 billion and $4.75 billion—an increase of between 6 percent and 17 percent.

About the Author

Auctiva staff writers constantly monitor trends and best practices of those selling on eBay and elsewhere online. They attend relevant training seminars and trade shows and regularly discuss the market with PowerSellers and other market experts.

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