This is an argument that has been raging over the last year or so as amazon selling has gained popularity as an alternative to ebay. Most of this was driven by the Cassini roll-out that caused sales to tank on ebay. But which is the best platform? Well, it turns out that this is not such an easy answer as saying one is better than the other. It really depends on a lot of factors. Each seller has different goals and abilities that can push them to one venue over the other. What I will do here is present the case for both and then you can weight the pros/cons for each and decide which one fits your situation.
Ebay has long been the defacto standard for online selling. But as amazon has matured, and especially after the ebay Cassini roll-out caused sales on ebay to plunge, more and more people have been lured to amazon. Amazon is truly an amazing platform to sell on. Sales are quick, selling prices are higher in most cases and if you are using FBA your job is done once you send your products in. But how much money are you truly making? That has been the topic of some serious debate. Hopefully, I can make some sense of it.
There is a reason why amazon sellers talk about their sales numbers. It is truly impressive to see someone start selling on amazon, and then a month later they have $10k in sales. But what does that really mean? How does that translate into cash you actually get to keep? Ahh...therein lies the heart of what it takes to be a successful amazon seller. You see, sales figures for amazon, especially FBA, are very misleading. Amazon charges a lot to be your fulfillment and customer service company. Most of the time you are going to be lucky to see a 25%- 35% gross profit from your sales. And that is BEFORE you pay taxes!
When I was heavily into FBA, I generally found myself being stuck in the rule of thirds. What that means is, if I buy an item for $5 then I have to sell it for $15 in order to make a $5 gross profit. Of course the higher priced the item is, the less of a third you need. But it is all relative to what you spent on an item. So, if you use the rule of thirds and do the math on our $10k/mo. new seller, even at 35% they kept $3,500 for that month. Now take out taxes at about 30% and you are left with $2,450. Have a margin at 25% and you are left with $1,750. So at the high end, you made just over $600 per week net profit. If it took you 40 hours to get everything purchased and sent into amazon, then you earned about $15/hour. Now this isn't a sexy number and neither is $32k a year, providing these numbers are consistent month to month. But saying you had $120k in sales for the year makes you look impressive.
Now let's move on to ebay. With ebay, you are generally buying thrift store or yard sale items at a very low price, marking them up by as much as 1,000% and selling them. With ebay you are generally making a 55% to 65% gross profit. So let's take that $10k/mo. and apply ebay numbers to it. At the low end of 55%, you will have a gross profit of about $5,500. After taxes, you are left with about $3,850, or about $962 a week and a pay rate of about $24/hour. So now with annual sales of $120k, your net profit is now about $46,200. Much more impressive. It's not hard to see where the higher profit margins are. But most people are impressed by the sales numbers and do not realize the true profit is way lower. As with anything, there are exceptions to evry rule, but this scenario would probably pertain to the average seller.
So why choose amazon over ebay if the profits are much lower? Well, it comes down to a couple of things. First, do you have the storage space to keep ebay items until they sell? Do you want to spend the time dealing with shipping, returns, customer complaints? If the answer is no, then you are probably a candidate for amazon FBA. You have to ask yourself if the trade off in profits is worth the work and hassles. For some it is, for others it's not. I dabble in both, but I try to buy highly profitable items for amazon so I can exceed the rule of thirds and get closer to 40% margins. Those items are not always easy to find, or readily available in large quantities. But when I do find them it's a nice payout for minimal effort.
Ebay is my bread and butter and amazon is my bonus. By doing both I am capitalizing on the best of both worlds. I am fortunate that I have enough space to store inventory for ebay. Not everyone has that luxury. You have to decide what is more important to you. You also have to decide if you can scale either business. It's a lot easier to scale ebay than it is to scale amazon. But if you have the drive to scale amazon then you stand to make a substantial amount of money. Choose what works for you. Maybe try both, you never know which way you will wind up going, but at least you will pick the best fit.
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