Is Amazon Stock The Best ECommerce Stock For Long-term Growth?

  • Amazon is showing strong growth, but we are yet to see how they can capitalize on it to grow exponentially.
  • eBay continues to squeeze money out of its sellers. Could that cause a lot of them to migrate elsewhere?
  • Alibaba has suffered a period through which it has fallen short of expectations. However, with a strong thirst for acquisitions, it could bounce back strongly.

The ecommerce industry is fiercely competitive, and this is driven by the low barriers to entry. As a result, the attrition rate is high. It is therefore commendable for a company to not just just stay in the industry for a long period of time but also to be able to generate billions of dollars in yearly revenue. As it stands, the giants of the ecommerce industry on a global level are Amazon (NASDAQ:AMZN), eBay (NASDAQ:EBAY), and Alibaba (NYSE:BABA). Walmart (NYSE:WMT) has plans to be a big player in this arena; however, that is something which we will have to wait and see. It is worth noting that Walmart's economies of scale and relationship with suppliers makes them a formidable prospect if they can execute on their plans.


Amazon has a market cap of $289.3 billion (Oct 29th close), and is now the world's largest retailer after starting from very humble beginnings.

To put it in simple terms, Amazon has had an astounding year. Investors who invested in this ecommerce giant in January 2015 have gained over 100% on their investment. Amazon's domination of the ecommerce market is based on their constant innovation, good customer service, exceptional execution, and a view towards 'trimming the fat' and increasing profitability.

AMZN stock chart

Source: Amazon stock price data by

The New York Times published an article earlier this year which showed the amount of pressure Jeff Bezos places on his employees. There was an uproar when the findings were published; however, this quest for perfection reflects well on their bottomline.

Amazon's latest earnings call was a welcome surprise to investors. They were expected to announce a loss; conversely, profits were reported at $79 million. This isn't huge but Amazon isn't usually profitable. Moreover, sales shot up by 23%. The market responded with a 7% increase in Amazon stock price.

Moreover, Amazon's popular AWS offering had an operating margin of 25%. As a result, this boosted investors confidence in Amazon. Additionally, it is worth noting that these impressive numbers came without the all-important festive period.

It is also worth noting that a well executed 'Prime day' added 2% to their bottom-line. This is vital to the future profitability of Amazon, because Prime subscribers are more likely to be repeat buyers.

The good fortunes of Amazon mean that Jeff Bezos is now the 5th richest man in the world- which is a nice bonus.


eBay has a market cap of $34.41 billion (October 29th close)- which is much smaller than Amazon's. However, it is worth noting that eBay doesn't own the products it sells. As a result, its performance is volatile compared to that of Amazon. As an ecommerce platform, it struggles to maintain a consistent customer service experience for its buyers. There is a sentiment among some consumers that eBay is a 'riskier' place to buy as compared to Amazon. Therefore, eBay is more affected by competition, and market forces than Amazon.

eBay's stock price more than halved in July 2015 when it was revealed that eBay was under performing in some key metrics. Moreover, the sellers on eBay are the lifeblood of the company; however, the increasing costs of doing business on eBay means that sellers are forced to operate on very tight margins. For casual sellers, the costs can be a turn-off.

It seems that eBay has the strategy of milking its sellers for as much money as possible. At the end of the day, putting a popular product for sale on eBay almost gurarantees eyeballs. Therefore, eBay is a great place for buyers to gain exposure. However, the high costs are forcing many sellers to sell their products on their own websites. It isn't unusual to receive a package from a seller which includes a discount for your next purchase so long as you buy it on their own website.

eBay's stock climbed 9% on the 21st of October 2015 due to a stronger than expected third quarter. However, eBay's longevity in the industry will be based on its ability to manage its seller and buyer relationships while improving its core product. At the moment, the unique selling point of eBay is unclear, because Amazon offers low prices, fast shipping, and an unparalleled customer service.

eBay has some weaknesses which inhibit its chances of being a strong candidate for long term growth. These are as follows:

--- There is an opportunity for eBay to provide more services to its business sellers while increasing their own bottomline. For instance, they could handle the storage of stock and charge sellers for the priviledge.

--- In Europe, Gumtree is a viable option for sellers. Fortunately, eBay owns Gumtree. It would be nice to see more of Gumtree's business model integrated into eBay's main ecommerce offering.

--- eBay doesn't own the products it sells, unlike Amazon, which continues to grow in terms of acquisitions, products, and services.


Alibaba arguably had the most eagerly anticipated IPO in history. To give you a measure of the level of anticipation, two months after Alibaba went public on the New York stock exchange, its market cap stood at $294 billion. The euphroia surrounding Alibaba was based on the fact that they were a giant in the Chinese market, and China had a healthier economy last year, with a growing middle class. However, Alibaba halved in value by September of 2015.

Importantly, the company continues to strive to diversify its investments, and has made investments in sport, healthcare, and entertainment. The grand plan is for Alibaba to hold investments in a variety of industries which it can then leverage to grow their core products.

One of Alibaba's core products is Aliexpress which is an eBay-esque site for delivering relatively cheap goods to the public. The issue is that Aliexpress is fairly [un]popular for being the Mecca of counterfeit goods. As a result, Alibaba has been hit with lawsuits. Unfortunately, there is little action to 'clean up' the site because of the demand for such goods.

In its quest for growth, this Chinese ecommerce giant has left many stones unturned. For instance, it is vital that it rids the site of counterfeits so that it can grow more internationally. This is due to the fact that Western consumers are less open to the notion of buying from a site on which the authenticity of goods is questionable.

Additionally, Alibaba's diversification plans scream of a drowning man clutching at straws. They need to show investors that they can be incredibly profitable. However, their core products could do with more polish. After all,  one cannot build a multi storeyed building on a weak foundation.


In conclusion, Amazon continues to be the biggest giant of the e-commerce industry. On the other hand, eBay has a lot of untapped potential, which could make it a more formidable opponent. Alibaba needs to do more to solidify its core products before going on an acquisition spree. The rapid 'scattergun' approach rarely works, and besides, from an investor perspective it can take a while to see growth in terms of dividends.

No one really knows how big Amazon could get. Walmart is looking to get in on the action- but it could be a case of too little too late.

Abdul Jawula Abdul Jawula   on Amigobulls :
Author's Disclosures & Disclaimers:
  • I do not hold any positions in the stocks mentioned in this post and don't intend to initiate a position in the next 72 hours
  • I am not an investment advisor, and my opinion should not be treated as investment advice.
  • I am not being compensated for this post (except possibly by Amigobulls).
  • I do not have any business relationship with the companies mentioned in this post.
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Comments on this article and AMZN stock

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I buy and sell on both Amazon and eBay. I absolutely hate eBay, and I like Amazon, although they need to do a much better job in packing books that cost over $50 as so many arrive damaged from terrible packing. The most optimistic views of eBay are coming from Wall Street. The most pessimistic views are coming from people who buy and sell on eBay for a living. I have a very pessimistic view of eBay. From my point of view eBay made a huge mistake turning its back on the vintage collectibles, antiques, and other rare items marketplace. EBay should go back to its roots where there is much less competition. For the eBay used and rare marketplaces to rebound eBay has to fix some of the serious problems that have ruined them for buyers. I’ve been buying and selling on eBay since 1997. I've spent an enormous amount of time on eBay over the years. I spend most of my time in the collectibles categories. I remember how as sellers we would wait for that once-a-year free listing day that came after Christmas. Then one year it didn't come and we were all so bummed. Then John Donahoe came on the scene and we went from no annual free listing day to nearly unlimited free listings. This has all but ruined eBay auctions. The sellers love it, but they don’t understand that it has driven away most of the buyers who have more money than they have free time. It has also hurt eBay’s bottom line because a lot of us are obsessive collectors, and we don’t list items for sale until our searches are finished. Having thousands of relists to wade through each week means that most of us never get around to selling on eBay because we can’t get our searching done.
The same overpriced or uninteresting items get relisted over and over and over. For hardcore collectors of unique or rare items it has become a nightmare. Constantly seeing the same unsalable items in our searches is driving us crazy. And it is killing auctions. One of my favorite categories is daguerreotypes.
It’s shocking how many of the auctions in this category have been relisted 5 or 10 or 50 times. It’s taken all of the fun out of searching eBay. This never happened when sellers had to pay for listings.
If eBay wants to save its vintage collectibles and antiques markets, it needs to immediately address this problem. We need to be able to filter out relisted items from our searches. The relists will still be seen by the vast majority of eBay buyers as most buyers aren’t the serious “power searchers” like I am. The buyers who have been very active on eBay for a very long time will be the ones who will use the filter. Another option is to segregate the search results for relisted items. EBay segregates the domestic from the international listings in search results. They could also put all of the relisted items below the "listed for the first time" items, separated by a line as they do now with international.
EBay should allow us to set a site preference to filter out auctions that have been relisted once, or twice, or three times. Forcing a buyer to see the same auction item show up in search results over one hundred times is only hurting eBay.
Don’t get me wrong, I am not against free listings, I am against not having a way to filter out auctions that have been relisted multiple times. That is what has ruined eBay auctions for buyers of vintage collectibles and antiques. Without the good buyers anymore the sellers of quality items have mostly left. This pertains to the collectibles and antiques categories only. When eBay is ruined for buyers it is also ruined for sellers.
For years I have monitored, every week, about 100 buyers who collect the same items I buy and sell. (Recently eBay took away the ability to view other bidder’s purchases.) They are hardly buying anything these days. They used to have a long list of purchases each week, now they are only buying a few items on eBay each week. Why? They are as passionate as ever about collecting, many of them are very wealthy, but they just can't deal with the huge proportion of relists to wade through, and the lack of quality items.
Since 1997 I have faithfully run, every week, my very long lists of bookmarked searches. Every week for 17 years I ran these searches! About a year ago I gave up and now I only run about 5% of these weekly searches, just the most important ones. I know I am missing a lot of items but I just don't have the time or the patience to find a needle in a haystack. If I could filter out any auction from my search that has been relisted more than 2 or 3 times, I could go back to running all of my searches again, and find a lot more things to buy. And maybe have a little time left over to sell. If I haven't bought an item after seeing it twice, there is zero chance that I'm ever going to buy it, so why do I have to see it again and again and again in my search results?
I'm buying only a tiny fraction of what I was buying when I was running all of my searches, because I don't have the time to wade through the tens of thousands of auctions I have already seen countless times. Some sellers are relisting the same item (unique antique items) every day, to get more exposure. With a way to filter out these multiple relists eBay will bring some sanity back to the site, and the good auctions and good buyers will return. Many of my long-time collector/dealer friends say “Oh, I never look at eBay anymore.” I will never understand why John Donahoe believed that the ultra-competitive "new merchandise" market was more attractive than the market that eBay was built on, the used and rare items, a.k.a. everything that was ever made!
I’ve been amazed that eBay has never reached out to their most active buyers and sellers, their longest members, to find out what we need and what problems and suggestions we have. We occasionally get survey questions from eBay, but they are always about “how do you like the design of the new home page” or “how likely are you to recommend eBay to your friends,” the questions are never about "how can we improve search to be more efficient for you.”
For years I tried to get eBay to allow searching in multiple categories at the same time. Instead of having to run three separate keyword searches in antiques, collectibles, and art, we should be able to check boxes for those three categories and have one search do all three at the same time, and only in those three categories. Maybe 10 or 12 years ago I stumbled onto a way to do this, so eBay must have been working on it, but it quickly went away.
Another serious problem with search is that a keyword search searches all of the listing, including the sellers business name, the boilerplate, etc. I asked Meg Whitman if there was a way to restrict search to just the words describing the item, and excluding the boilerplate and spam words that most sellers use to draw attention to the listing. She told me that one engineer told her they could design that into search, and another said no. That was the last I ever heard of that idea. When I keyword search for “Alaska" items I get every seller who says “Shipping is extra to Alaska and Hawaii.” Someone searching for Ohio memorabilia will get “Ohio residents are required to pay Ohio sales tax.” The boilerplate should not be included in the text to be searched.
When eBay took away the wild-card search, after many of us had spent years creating very sophisticated searches using the wild card, there was a huge outcry from thousands of eBay users. Did eBay listen to its users about why the wild-card was vital to eBay search? No. They weren’t interested.
But right now the issue of being able to filter out relisted auctions from search is the critical issue. It’s the problem that is ruining our eBay experience and preventing eBay from seeing the growth that one would expect for a site with so much potential. The bottom line is that I'm very bearish on eBay and very bullish on Amazon, as Amazon's marketplace (third party sellers) profits will continue to grow. Amazon treats its third party sellers pretty well, eBay treats its sellers very poorly.
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Thank you for taking the time to post a comment from an eBay user's perspective.
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