Selling on Amazon and eBay- Perfect Competition?

This is as close to perfect competition as you can get.  It essentially says that you need to compete on costs to make money on the marketplaces.  There are no abnormal returns in this model and the natural evolution here is for firms to differentiate their products so they no longer compete on costs.  Customer service is a big differentiator.

“Merely being listed on eBay or Amazon isn’t a sustainable business,” said Dennis Ceru, an entrepreneurship professor at Babson College in Wellesley, Mass. “There are a lot of people going down this path that are making little or no money.”

Building viable enterprises off these marketplaces requires sourcing inventory cost-effectively, researching each marketplace’s procedures and commissions, polishing customer-service practices and managing your online reputation.

via Small-Business Guide – Small-Business Guide – How to Sell on Amazon and eBay – NYTimes.com.

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