Out-Law / Your Daily Need-To-Know

Defection and retaliation in Amazon.com’s turf war with eBay

03 Oct 2001, 12:00 am

Amazon.com has launched a legal counter-attack after its former Chief Financial Officer Christopher Zyda was appointed eBay’s Vice President of financial planning and investor relations. The move has been seen by market observers as the latest battle in a war between two companies whose business strategies increasingly collide.

According to Amazon.com, Zyda was a trusted member of a “select inner circle of top executives” and it fears that Zyda’s “intimate knowledge” of the on-line retailer’s “most confidential business plans” could allow eBay to siphon sales off Amazon.com’s core market.

Presently, both companies are looking for ways to increase revenue despite an economic slowdown and are stepping on each other’s toes in the markets they are addressing.

David Kathman, a Morningstar analyst, speculates,

“Amazon and eBay are both leaders in their respective niches in e-commerce. Amazon Auctions hasn’t been a total failure, but it hasn’t been as successful as they hoped. EBay meanwhile still dominates the auction world and has also been getting into fixed-price selling. Amazon may be getting concerned.”

EBay has been explicit in targeting Amazon.com’s core market. Chief Operating Officer for eBay, Brian Swette, recently declared, “We’re the no.1 in all categories except books, movies and music and we hope to be a leader in that category.” The same category that has been the core of Amazon.com’s market since the company was founded in 1995.

Compounding the competitive onslaught is an Amazon.com - eBay race to build a new generation of web storefronts, outlets where new products can be offered at fixed, heavily discounted prices. Both companies see on-line storefronts as a necessary step towards ownership of an e-commerce “platform” that will serve as a retail model for the entire internet.

This marks a departure, for both companies, from their present mode of selling which largely involves overstocked inventory or selling used items to the highest bidder. Instead, Amazon.com and eBay hope to focus on facilitating transactions for brand name storefronts, discount outlets, person to person auctions or any other form of commerce.

Inevitably, the market may not be big enough for both competitors. “The big carrot is who’s going to be the platform that retailers sell from. At some point down the road they could collide,” commented an analyst for Deutsche Bank.