The force is strong with Jeff Bezos. The Amazon (NASDAQ:AMZN) founder and CEO only had to make a passive-aggressive hint that its smaller rival eBay (NASDAQ:EBAY) wasn’t holding up to the competitive power of his ecommerce jujggernaut to send EBAY stock lower by 3.7% on Thursday.
ICYMI, with the “49 Most Important Words” in his annual letter to shareholders, Bezos said “independent sellers do so much better selling on Amazon.” Granted, it was a cheap shot of questionable accuracy, and glossed over some key nuances of the matter. But, it did damage all the same.
Whatever the case, if eBay CEO Devin Wenig was smart — and he certainly has been about the matter so far — he might want to continue promoting the reality of his response to Bezos comment. That is, point out how Amazon is increasingly frustrating its third-party sellers that may find eBay to be a friendlier platform.
eBay Fightin’ Words
The jab was a small but pointed snippet in Bezos’ annual shareholder letter. He noted:
“Third-party sales have grown from $0.1 billion to $160 billion – a compound annual growth rate of 52%. To provide an external benchmark, eBay’s gross merchandise sales in that period have grown at a compound rate of 20%, from $2.8 billion to $95 billion.”
The letter went on to explain “Third-party sales have grown from 3% of the total to 58%. To put it bluntly: Third-party sellers are kicking our first-party butt.”
The numbers are (presumably) accurate, but the self-deprecating detail was a painfully obvious ploy to position Amazon as a victim rather than a challenger.
Yes, third-party sellers may sell more goods via Amazon.com than Amazon itself out of its own inventory. That doesn’t mean they’re thriving, though, nor does it mean they’re happy with the persistently deteriorating relationship… a point eBay’s Wenig was willing to subtly make in a tweeted response to Bezos message.
While I appreciate the ink dedicated to @ebay from the ceo of the company not focused on competition, think I”ll dedicate my letter to customers, purpose and strategy. We don’t compete with our sellers. We don’t bundle endless services to create barriers to competition.
— Devin Wenig (@devinwenig) April 11, 2019
Wenig’s tweet cut right to the heart of the matter that could prove to be an unexpected catalyst for eBay Inc. stock.
Soft Ground to Make a Stand
In retrospect, perhaps the best thing Bezos could have said about eBay and third-party sellers was nothing. Simply by bringing it up, he put the issue front and center for sellers, buyers and investors.
The short version of a long story: More and more of Amazon’s third-party sellers are falling out of love with Amazon as a sales platform.
A comment posted at Amazon’s “Seller Central” forum in October of last year lodges a common complaint in no uncertain terms:
“Amazon keeps directly undercutting third party sellers”
The poster goes on to explain “[I] will phase out my high value items as Amazon keeps directly price undercutting and manipulating what is showing to buyers. Using all kinds of tricks to stifle competing inventories.”
The frustration isn’t uncommon among Amazon’s third-party sellers.
While both facilitate e-commerce, eBay and Amazon are hardly carbon copies of one another. Namely, eBay never competes with sellers by offering its own merchandise.
The tradeoff is scale. Amazon has it, and eBay doesn’t. It’s more likely a seller on both sites will drive more sales volume via Amazon.com. That doesn’t necessarily mean that seller will generate more profits via Amazon.com, though.
It’s a dynamic that’s always been in place but rarely fully appreciated. In the wake of Bezos’ planned point of dogging eBay though — an unsolicited, unprompted poke — one can’t help but wonder if Amazon is slowly deteriorating under its third-party hood.
Bottom Line for eBay Stock
All in all, it’s not a reason to buy eBay stock… yet. Amazon may well stumble into an “aha” moment where it finally figures out it can’t compete with its partners as fervently at it has. Even if it never has that moment, Amazon is still Amazon, reveling in its disruptive power.
This could be a turning point for Amazon though, and by extension for eBay. Amazon.com may be out of viable growth opportunities, opening the door to other third-party sellers like eBay and even Walmart (NYSE:WMT) for that matter. Walmart sometimes competes with third-party vendors on a product-by-product basis, but doesn’t make a point of promoting its own goods first.
It remains to be seen if eBay’s Wenig will pour salt on Amazon’s wound that Bezos ironically opened. But, he certainly should, now that consumers and investors are thinking about it.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.