's Next Target: eBay Inc.

Most headlines regarding focus on the retailer's latest innovations or direct competition with bricks-and-mortar giants such as Wal-Mart . While these are certainly critical elements of's growth and the investment thesis for investors trying to make sense of the company's valuation, is waging a number of other competitive battles. One of the more significant and often under-appreciated aspects of's evolution is its increasingly direct competition with eBay .

Third-party seller growth
eBay's core marketplace business is relatively simple: the company has created a dynamic environment in which small businesses and individuals can get easy access to millions of potential buyers online. Within this business, eBay's auction-format sales declined over 14% in April compared to the prior year, while sales of fixed-price goods grew 18%. While some may consider 18% growth in fixed-price goods sales a highlight, it is dwarfed by the 27% growth in third-party merchant sales at

In fact, has reported higher "same store sales" than eBay for every month of the past year according to Channel Advisor. There are plenty of anecdotal stories about higher average selling prices on and more efficient user interfaces, but's fulfillment services differentiate the companies. The ability to outsource fulfillment logistics is a significant competitive advantage that attracts small businesses to sell on

One-of-a-kind items
While most consumers continue to think of as a place to search for the lowest price on commodities such as books or DVDs that are sold by any number of retailers, is also inching into eBay's territory by expanding its website to feature one-of-a-kind items such as fine art.


Just two weeks ago, announced its most recent expansion into collectibles: its collectible coin store. With this most recent expansion, is hoping to gain a foothold in the collectibles market. This is significant for two reasons. First, collectible coins are a surprisingly large business, with estimated sales that exceed $3 billion in the United States last year. Second, the collectibles market is highly fragmented and has not faced significant disruption or new competition since eBay first exploded onto the e-commerce scene; this provides with the opportunity to capture significant market share.

Coins from the Saddle Ridge Hoard

Additionally, the new collectible coin store is yet another example of how finds new ways to attract customers to its growing ecosystem. A collector may come to in search of a rare coin from the recently discovered Saddle Ridge Hoard, the largest discovery of buried treasure in the history of the United States, and also add a DVD player or box of golf balls to the cart before checkout.

As with many of's initiatives, significant cross-selling opportunities exist whenever a customer visits with one goal in mind and ultimately finds other items to purchase as either part of the same transaction or through a subsequent purchase.

Amazon Payments will rival PayPal
The heart of the investment thesis for eBay is often PayPal, which accounted for 43% of eBay's revenue last quarter. has been slowly expanding its payment infrastructure to collect payments on behalf of other companies. Reports that will begin to serve as a payment-processing intermediary for subscription businesses highlight the latest encroachment on PayPal's leadership position. The effects of's challenge to PayPal will take years to measure, but this very well could be the beginning of the end for PayPal.  

It is certainly premature to declare Amazon Payments the long-term winner over PayPal. However, given's history of highly aggressive pricing for services such as its cloud-computing platform Amazon Web Services and the rumors that a new Amazon smartphone is just days from launch and could feature mobile payment features, certainly a number of reasons exist to believe that could launch a strong competitor to PayPal. strengthens its ecosystem's focus on third-party sellers and one-of-a-kind collectibles could turn into yet another competitive advantage. With integrated fulfillment services and access to millions of items available for rapid shipping, both buyers and sellers will have plenty of reasons to select as the default destination for buying and selling items that were previously only available on eBay and smaller collector websites. 

Meanwhile, third-party inventory and collectibles are not something that traditional bricks-and-mortar retailers like Wal-Mart have ever considered as part of their business models. As a result, has found yet another way to offer products to consumers that most retailers cannot match and are not equipped to add. Each time can accomplish this, the company will continue to drive more traffic to its website and divert potential customers from competitors such as Wal-Mart.

By grabbing market share from eBay and offering more products that cannot be found at Wal-Mart, continues to differentiate itself from the competition and expands its lead as the most innovative retailer in the world. Investors who believe in's ability to maintain this trend over the long term will be well served by owning shares in the company over the next five years.

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Brian Shaw owns shares of The Motley Fool recommends and eBay. The Motley Fool owns shares of and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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