- Amazon's Prime Now 1 hour delivery service is set to become a game changer.
- eBay doesn't own any fulfillment centers, which is a big issue.
- Amazon's drone service and increased commitment to customers is set to allow them to increase market share in 2016.
Amazon Launches Amazon Prime Now
In the e-commerce industry, speed is everything; and in Amazon's quest to be the one-stop-shop for everything from electronics to your weekly groceries, investors will be happy to see that Amazon (NASDAQ:AMZN) is making moves to increase the speed of deliveries.
Amazon Prime Now is an improvement on Amazon's famous Prime offering. It promises to have items delivered in an hour or less. An analysis of social media shows that some customers have reported their items arriving at a speed which competes with takeaway delivery. For instance, one customer reported that his item arrived in a blazing 18 minutes!
Amazon Prime Now is key to dominance in the highly competitive e-commerce marketplace. Studies shows that Amazon Prime subscribers not only buy more, but are also more loyal. As a result, an increase in subscribers has a positive correlation with regard to revenue generated from the e-commerce division.
eBay Has Missed A Few Tricks
eBay (NASDAQ:EBAY) the another big player in the e-commerce arena, has suffered somewhat with revenue growth standing at 6.7%- which is below the industry average of 7.0%. It is worth noting that eBay relies heavily on fees paid by sellers. As a result, they have come under a bit of a backlash with regard to how sellers are finding it increasingly difficult to make significant profits on the platform. This issue is even bigger in countries such as the UK, which has relatively high taxes.
As a result, eBay is losing sellers, and a significant portion of sellers, to Amazon, and Shopify. It isn't unrealistic to predict that this trend will continue over the next few years. Interestingly, Amazon has its own fulfillment centers, and allows sellers to keep their stock with them and have it sent out to buyers. In a clever move, Amazon has no minimum inventory, and therefore merchants are welcome to try out the service. This is highly convenient for sellers as they could technically have wholesalers deliver straight to Amazon, and have it sent out to buyers from there.
On the other hand, eBay doesn't have any fulfillment centers. However, several companies have sprung up to offer fulfillment services to sellers on the eBay platform. All signs indicate that these companies are flourishing; therefore eBay has certainly missed a chance to add considerable revenue to their topline.
Amazon's Next Line Of Attack
Moreover, Amazon has plans to roll out delivery by drones next year. This will not only cut delivery times by approximately half, but will also reduce Amazon's costs in the long term, and serve as a more convenient delivery method. Additionally, the speed and reliability will allow Amazon to significantly widen its range of services. For instance, fresh produce or even cooked food could be delivered directly to customers.
I predict that the aforementioned is part of Amazon's wider strategy for investing significantly into drone technology. Once they combine it with their long term strategy of undercutting the competition, they are onto a game-changer.
From a financial perspective, Amazon continues to grow from strength-to-strength. For instance, their debt to equity ratio pulls ahead of the industry average at 0.66. This indicates that management is making sound financial decisions in order to create a stable future for the company.
Secondly, Amazon has had its earnings grow at an exponential rate of 117.89 over the past fiscal year. When we consider that Amazon Prime Air isn't yet live, and AWS is set to double in revenue over the next five years, this is a company moving firmly ahead.
On the other hand, eBay has a quick ratio of 1.51 which is a key factor when analyzing finances. Moreover, it indicates robust liquidity.
With regard to stock values, it is a story of different fortunes. Whereas Amazon's stock value has grown Y-o-Y over the past 3 years, eBay's has taken a more 'stable' form.
In conclusion, as Amazon pulls ahead in the e-commerce space, eBay may find it very difficult to compete. When we consider that eBay's sellers are becoming increasingly disgruntled, and Amazon offers a safe haven, eBay will have to do more in terms of innovation. In the current e-commerce landscape low prices aren't enough, buyers also want their items quickly.