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eBay Turns Up the Heat on Amazon

By Demitri Kalogeropoulos - Apr 3, 2013 at 6:00PM

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The latest battle in the marketplace wars.

eBay (EBAY 5.06%) just raised its bid for the affections of its merchants.

The online marketplace giant is testing out a new perk for sellers that offers them small business loans through PayPal. Shoppers already have access to credit with PayPal, and this move will expand that flexibility to many of the vendors that use eBay's platform to hawk their wares.

The lending announcement follows big changes to the selling experience that eBay rolled out last month. Those tweaks were aimed at making a more attractive destination for merchants. And together the two steps are a clear attempt to turn up the heat on (AMZN 3.66%).

After all, the stakes are high in these marketplace wars. Last quarter Amazon counted 39% of its product sales as coming from third-party vendors, up from 36% the year before. And since they include a markup -- on everything from logistics to customer service -- those sales are more profitable to Amazon than sales of its own products are. That's a big reason that Amazon was able to book a jump in gross profit over the holiday quarter.

eBay moved more than $6 billion through its marketplace last year, up from the $4.8 billion it managed in 2010. But the company is strictly in the business of connecting buyers to sellers, and doesn't offer any of its own products. That's a fact that it never misses a chance to drive home to vendors. Here's how the company put it in last month's announcement on its blog: "unlike other merchants, eBay doesn't compete with our sellers at the marketplace."

It doesn't take much reading between the lines to see that by "other merchants," eBay means Amazon. And now eBay joins Amazon as another major marketplace giving out loans to vendors. The e-tailer has been doing it since launching the "Amazon Lending" service in late 2011.

For eBay's part, the company hopes to double the number of active users on its platform by 2015. It also aims to boost its selection above the already massive 400 million items that were listed on eBay in 2012. That kind of growth would be impressive. But to get there, eBay needs to have sellers firmly on its side. And my guess is that Amazon will have something to say about that.

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