On Labor day in 1995, the founder of eBay, Pierre Omidyar, conducted an experiment. Omidyar tested the auction site and was stunned that his broken laser pointer was sold. This was the beginning of the booming industry in e-commerce. eBay had expanded their company internationally for the past few years. eBay is considered the world’s largest online trading website and one of the leading market leaders in the world. We will focus on comparing eBay to its best performer, Amazon, which are two of the largest businesses in the e-commerce industry. According to the NASDAQ, eBay and Amazon are noted as the market leaders of online business. Amazon sells a broad range of products to their customers such as DVDs, CDs, multimedia devices, as well …show more content…
The three ratios I will use to compare the two companies are the leverage ratio, liquidity ratio and profitability ratio.
According to the income statement, last year’s sales revenue grew to around 35% while eBay only had a 3% increase. On 2015, eBay and Amazon had continue to increase in total revenue according to the statistics. In the last fiscal year, we can imply that eBay and Amazon are successful in producing profit.
In the leverage ratio, the debt ratio revealed that eBay is at 25.7% and Amazon is at 55.9%. This tells us that Amazon has more debt to pay than eBay. eBay has lower percentage in risk operation than Amazon because eBay’s assets are invested more in equity than in debt. In comparison to Amazon, eBay has greater borrowing power and financial flexibility to expand its company.
Using the current ratio to compare liquidity from the two business, it tells us that eBay is 1.6 and Amazon is 2.6 from the current ratio. This tells us that both companies have the ability to pay off their liabilities. In the last fiscal year, the statistics had shown that eBay had a much higher current ratio than Amazon, this tells us that eBay produced more cash and cash equivalents to pay off its short-term liabilities compared to Amazon. Although this tells us that eBay is not financing enough of its assets like mergers and acquisitions. The quick ratio cannot be used to compare the two businesses as eBay doesn’t have inventory.
The following
The three liquidity ratios show Amazon has very good liquidity, which means it could easily satisfy current liabilities with current assets. Comparing to Amazon, Ebay is even more liquid as it could satisfy its short term liabilities purely by cash and cash equivalents.
Although it is the most established because of its long history and early start, competitors such as Alibaba Group Holding Ltd, AutoZone Inc., eBay Inc., Rakutenchi Inc., Netflix Inc., Jet.Com, Wal-Mart and Time Warner Cable among others exist (Yahoo Finance, 2015). Notably, apart from Jet.com, Amazon’s competitors are segmented according to products and services offered; for instance, Wal-Mart stores Inc. offers competition in general merchandise and electronics segment while eBay, Time Warner Cable and Apple offers competition in the media segment. Among the competitors, Apple Inc. and Google Inc. have the highest market capitalization; however, the Amazon’s dwarfs all other competitors. Amazon has a high market capitalization at $254.82 billion (Nassauer, 2015). The table below shows Amazon’s major competitors based on their market capitalization and 52-week share price range
The chart on the right shows the relative sales for EBAY and its competitors. These companies have diverse products that are sold on line to consumers and industries all over the world. This is not the best way to measure the success of these companies because it does not account for the size of the company into account. The best way to measure the performance of these companies would be through their relative return on equity.
The next segment of this look at the financial condition of Amazon.com involves a horizontal and vertical analysis of Amazon’s income statement and balance sheet. Since both of these statements involve many segments, we will address key and noteworthy figures to gain a broad understanding of Amazon’s progress in the last three years.
In 1995 computer programmer Pierre Omidyar established eBay Inc. (eBay) from his living room in San Jose, California. He created a simple prototype of an auction site on his personal website and called it Auction Web, then let people list items for auction. He was amazed at the number of buyers and sellers that his site attracted and he soon had to set up a separate site devoted to auctions. By charging sellers for posting their auction items, and taking a small percentage of each sale, the company made money simply by supplying a place for buyers and sellers to meet. Business grew through word of mouth. A Feedback Forum was added to allow buyers and sellers a way to rate each other for honesty and reliability. Branching out from collectibles, the site quickly expanded into a vast range of items, including electronics, home furnishings and appliances, and cars and other vehicles.
The effectiveness of Amazon’s financial management can be seen in the performance over the last 5 years. Largely investor confidence has been very high throughout the 5 years analyzed. This can be seen in the increase of 4 times the stock price. Stock prices were at an all-time high the end of 2013 at price of $405USD each (Morningstar, 2014). Through analysis of the financial statements and history of stock prices it can be determined that the financial management team at Amazon is doing a great job.
As for Alibaba.com, it earns secondary revenue through its Gold suppliers accreditation which promises reliability. Though Alibaba Group is famous for its primary site Alibaba.com, its first business now accounts for only a small part of its portfolio (Osawa, 2013), and is often dogged by criticisms from the finance world, notably referred to as “the worst asset that [Alibaba Group] has” (CNBC, 2012). On the other hand, Amazon sells its own products such as its Kindle and offers additional services such as streaming (Rayburn, 2011). It also deals with web design for external companies looking into e-commerce (Layton, n.d.).
It would be virtually impossible for a new company to reach the magnitude of inventory and status that Amazon maintains. When visiting Amazon, the number of products and services it offers is mind-blowing. Amazon has been in the internet marketplace for about thirteen years now; it would be extremely difficult for a start-up company in the industry to raise enough capital to even compete with Amazon on a lower level. The experience of enjoying low pressures from new entrants make Amazon believe that their absolute competitive advantages in patented technology, such as 1-Click ordering, operational model and “sell anything” mission could be directly copied and even leveraged in the foreign markets where the online retail industry have not developed or matured.
Amazon has grown rapidly since their inception. The company experienced a surge is sales of 313% until 1998, supported by 8.4 million customer accounts in over 150 countries, of
The company has many strengths. First, Amazon is the world’s leading online retailer. According to the 2016 Annual Report, Amazon had total net sales of US $135, 987 million in 2016. These total net sales include three segments which are North America, International, and AWS. Second, in comparison to many companies, Amazon has a superior logistics and distribution system, which allows the company to actualize improved customer fulfillment. Third, with its prolonged strategic drive on low-cost, differentiation, and focus, Amazon offers a wide range of product at low prices to customers. Fourth, Amazon enjoys global recognition from its customers. As stated earlier, Amazon built a strong brand in very little time. Finally, the
Company D has higher current ratio and quick ratio which is higher 2.43x and 2.3x respectively. This was because Company D had higher cash and short term investment which was 55.6% while Company C only has 1.4%. It proves that Company D is financially conservative and it matches with the second described company.
Read the case carefully and answer the following questions: 1.Till 2005, eBay EachNet was the leader in the Chinese e-commerce market, controlling more than half of it. But eBay EachNet soon lost its market leadership position to Taobao.com (Taobao). In this context, analyze the reasons that can be attributed to Taobao’s edge over eBay. 2.a. To enable people to trade with each other, Pierre Omidyar created a marketplace in September 1995 which was later called eBay. By mid 1997, eBay received one million page hits per
Headquartered in Settle, Washington DC, Amazon.com is a cloud computing electronic and commerce company (Amazon, 2016). The company is one of the largest internet based retailers both in the US and globally based on total sales and market capitalization. The company does a majority of its business through online retail websites throughout the United States and with more that ten countries throughout World. In 2015, Amazon overtook Wal-Mart to become the most valuable retailer by market capitalization.
Amazon and Ebay are two well-known brands of online shopping sites. They have evolved and grown from small firms to the giants of e-commerce today. In this essay, a comparison would be made between the two firms.
The company eBay Inc. is an American multinational Internet consumer-to-consumer corporation. Founded in 1995 by Pierre Omidyar in San Jose, California, it is now a multi-billion dollar business with operations localized in over thirty countries including China and India. It’s main enterprise is eBay.com, an online auction and shopping website that allows people and businesses to buy and sell a broad variety of goods and services internationally. Millions of collectibles, décor, appliances, computers, furnishings, equipment, domain names, vehicles, services, intangibles and other miscellaneous items are listed, bought, or sold daily on eBay. Anything can be auctioned on the site as long as it is not illegal and does not violate the eBay’s Prohibited and Restricted Items policy.