- eBay was often cheaper than Amazon, particularly for many smaller items and things that mom-and-pop sellers might offer.
- eBay remained a better venue than Amazon for finding many niche items, such as collectibles and vintage goods.
The second advantage remains largely in place for now, but Amazon is quickly neutralizing the first. Partly by lowering its per-unit fulfillment costs by growing its economies of scale, and partly by lowering its shipping costs by building new warehouses and making big logistics investments.
But most importantly, by turning Amazon Prime into a way-of-life for tens of millions of consumers in the U.S. and a handful of big overseas markets. Enough so that many Prime members don't care if Amazon doesn't offer the lowest possible price -- just as long as it's cheap enough, given its convenience, its rapid shipping and Amazon's top-notch customer service.
It is telling that Amazon's North American e-commerce segment has seen revenue growth accelerate for the last two quarters off a giant base, hitting 27% in the second quarter. It's also telling that eBay's constant-currency gross merchandise volume (GMV) growth has been stuck at 5% for the last four quarters, with U.S. growth coming in at just 3% in Q2.
And eBay's problems don't end with Amazon. Walmart Stores Inc (WMT) , aided by acquisitions, in-store pickup discounts and a growing inventory of items available for free shipping on $35-plus orders, has seen its e-commerce sales rise sharply in recent quarters. And StubHub, once seen as an eBay growth engine, saw a 5% constant-currency Q2 GMV decline, thanks in large parts to efforts by sports leagues and others to move online ticket sales to affiliated platforms.
In spite of these challenges, eBay's shares have followed the tech sector higher in 2017, and now trades for 17x a 2018 adjusted EPS consensus of $2.23. And that consensus assumes 10% EPS growth, which might be easier said than done. If it looks as if eBay will struggle to deliver meaningful earnings growth next year, shares are bound to see a haircut.
Other posts in the 10 Stocks We Hate in October series: