Has the Suicide Bomber of Retail, Amazon, Met its Crazy, Price-Cutting Match?

Amazon.com (AMZN) is usually the one sucking away customers from other retailers with lower prices, but it looks like eBay (EBAY) is about to give Amazon a taste of its own medicine. eBay intends to lure over Amazon Marketplace sellers – outside retailers that play a big role in Amazon’s overall revenue growth -- by undercutting the fees Amazon charges for the listings. On Tuesday, eBay published a nifty chart comparing its new lower fees against Amazon’s for sellers of things like computers, clothes, auto parts, collectibles…really, just about everything one sells online.

For Amazon shareholders, the implications of a major defection at Marketplace are rather serious. According to figures reported by retail technology experts StorefrontBacktalk, Marketplace sales make up about 12% of Amazon’s overall revenues and 40% of all goods sold on the site. Moreover, the revenue Amazon keeps from Marketplace is growing more than twice as fast as Amazon’s own retail sales. Marketplace sellers are a key reason Amazon was able to report 27% revenue growth last year.

AMZN Revenue TTM Chart

AMZN Revenue TTM data by YCharts

And we all know that it’s the upward curve in that revenue chart that keeps Amazon shares trading at extraordinary prices. It’s certainly not the earnings trend that has kept its PE ratio near the top of the S&P 500 list.

AMZN EPS Diluted TTM Chart

AMZN EPS Diluted TTM data by YCharts

Can eBay really take this business from Amazon? There are several reasons for doubt. eBay’s new rates aren’t quite as cheap as they appear in its propaganda, as they don’t include costs for collecting payments via PayPal. (Amazon doesn’t charge an extra payment fee.) And sellers may view Amazon as the higher-end home; kind of a Macy’s (M) next to a T.J. Maxx (TJX).

But some of Amazon’s Marketplace customers aren’t happy. Last week, a group of them filed a class action lawsuit accusing Amazon of withholding their payments. eBay shareholders are apparently quite optimistic about the whole thing. eBay’s share price was up more than 4.5% in the day after the announcement; Amazon, unchanged.

EBAY Chart

EBAY data by YCharts

Dee Gill, a senior contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine. She can be reached at editor@ycharts.com.

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