New E-Commerce Competitors Not A Big Threat To Amazon And Ebay Right Now

Increased competition is coming to the e-commerce industry: both Alibaba and Walmart said the past couple weeks that they are launching competitors in the US to services like eBay and Amazon.

Though it’s early days these are real competitors with significant track records in both brick and mortar retail and e-commerce.  As a result, it makes sense to evaluate the implications of two new competitors to Amazon and eBay for share of the $130-billion-plus US e-commerce market. 

Here is what we found:

  • Small share gains over time could potentially pinch margins at both Amazon and eBay.
  • A more likely scenario is that new competitors will steal share from brick and mortar retailers not online  retailers as e-commerce continues to grow faster than total retail sales.

First, a breakdown of the competitive dynamics at work. 


Competitive Advantages

  • Strong lead (more than double the share of eBay).
  • Fulfillment service included as an additional service to sellers.
  • Strong customer service reputation.

Competitive Disadvantages

  • Media sales could suffer as consumers turn more to digital delivery.


Competitive Advantages

  • Starting from zero so only has up to go from here.
  • Will likely launch a major ad campaign after its service is introduced in the US (it spent $30 million following its European launch).
  • Has operating experience and found success in China and overseas.

Competitive Disadvantages

  • No brand recognition in the US.
  • Unclear if consumers will embrace a service run by a foreign country.
  • Does not have auction service for now (though it may in the future with Taobao).


Competitive Advantages

  • Payment processing could help support growth and margins even in Marketplace starts to lose share.
  • If the company can work through some its user-experience issues its users may remain loyal to its brand.

Competitive Disadvantages

  • Still a lot of complaints about the user-experience from buyers and sellers.


Competitive Advantages

  • One of the strongest brands in America.
  • Sells a lot of electronics and tech goods, which are growing as a percentage of e-commerce sales.

Competitive Disadvantages

  • Massive brick and mortar business will likely occupy most of management’s attention.
  • Strength of brick and mortar brand may make it difficult to get consumers to start thinking about Walmart as an e-commerce company.

eBay has the most to lose from any gain in share by Walmart or Alibaba in terms of operating income margins due to the fact that its margins are higher than Amazon’s (they exceed 20% whereas Amazon’s are below 5%) and its smaller revenue base.  Interestingly, our analysis also indicates that, all things being equal, only a small gain in market share by Walmart and Alibaba could cut fairly materially into eBay’s margins.  For example, a 60 basis point shift in market share taken equally from eBay and Amazon would result in a near 300 basis point reduction in operating income margins at eBay (see Table below).  Amazon would see its margins decrease about 20 basis points.

However, this doesn’t take into account the fact that the US e-commerce industry will likely grow at a rate well above total US retail sales over the next few years.  As more shoppers migrate online and more competitors enter the market we think that new entrants into the market will grow their revenue on top of overall e-commerce market share growth, rather than by stealing share from the market leaders Amazon and eBay.  For example, if US e-commerce continues to grow its share of total US retail sales by about 50 basis points per year as it has the past five years this would represent about $20 billion in additional e-commerce sales per year if total US retail sales grow about 2% per year on average (in-line with most estimates over the next few years).  New entrants like Walmart and Alibaba would likely be thrilled to earn $1 billion of this over the next few years, leaving plenty of growth for dominant brands like Amazon and eBay.

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