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Online Auctions, Part 2: The eBay Diaspora

Online Auctions, Part 2: The eBay Diaspora

As eBay shifts its strategy to appeal more to larger sellers, it risks alienating the clientele that made it a success. However, the company is making changes and working toward a strategy it hopes will lead to growth, and that's better than doing nothing, say experts.

By Jim Offner
09/10/08 4:00 AM PT

Part 1 of this two-part series focuses on the way eBay's newest business strategies, which favor larger sellers and fixed-price sales, are altering the online auction marketplace. Part 2 takes a look at where many disenchanted smaller sellers and auctioneers are migrating in search of friendlier environments to sell their wares.

Online auction site eBay grew up on the receipts of smaller-scale sellers.

Now, as the San Jose, Calif.-based company reaches out to larger, big-volume dealers, some of those original core customers are drifting away.

Some sellers have moved on to competitors such as Amazon.com, said Charles King, principal analyst with Pund-IT.

"I think a lot of the mom-and-pop retailers are probably looking to see if there are opportunities," King told the E-Commerce Times. "Amazon has been getting a pretty good reputation for certain kinds of products. I think it's rapidly evolving."

Some erstwhile eBay clients may now be looking to target specific consumers, King expects.

Craigslist, which currently is involved with eBay in a court case stemming from eBay's introduction of its Kijiji classified-advertising platform three years ago, has presented a formidable alternative to eBay, King said.

"I talked with one person recently who's a pretty active eBay retailer, and they switched all their efforts to the local Craigslist," King said. "What they love about Craigslist is that it's local buyers, it's all cash. There are no logistics problems; getting the products to the buyers sometimes can be complicated. I think it's interesting -- the ongoing stresses and strains between Craigslist list and eBay."

Crowded Marketplace

Indeed, depending on what's for sale, there appear to be numerous alternatives to eBay for Web-based sellers. Among sites gaining notice are Bidville, which has no listing fee for merchandise that doesn't sell and takes a 5 percent commission on items under US$25. Fees for pricier items vary.

Etsy.com specializes in handcrafted and specialty items. It charges a 20 cent listing fee and takes a flat commission of 3.5 percent.

eBid charges no listing fees or commissions.

Contenders for eBay sellers -- and the buyers who want their goods -- include uBid, Bidz.com, AuctionWeiser, The Free Auction, AuctionAddict and numerous others.

Then, there's Amazon.

"It's funny," King said. "Amazon is kind of doing both things and clearly established themselves with a fixed-price model early."

It adds up to potentially dangerous times for eBay, said Rob Enderle, principal analyst with the Enderle Group.

"People don't like change," Enderle told the E-Commerce Times, referring to recent alterations in eBay's fee structure that shifted the burden from items listed to items that sell.

"The good news for [eBay] -- it takes quite a bit for [sellers] to move. But, once they move, they don't come back. The danger here is competitive encroachment on their existing base. The existing customers are likely to want to go someplace else."

It's hard to tell exactly where those who bail out are going.

"I don't know, but it would be interesting to know," King said. "It will probably take a year to get a sense of where these people are going."

Alternate sites may be proliferating, but not necessarily to the detriment of eBay, company spokesperson Usher Lieberman told the E-Commerce Times.

"We find many of our most successful sellers tend to be multichanneled," Lieberman said. "It's the reality of the way people shop today. Certainly, we want to have all their e-commerce business, and we're structuring ourselves so that we can have all their business -- but they've looked at multiple channels."

eBay is more diversified than other auction sites, and that's an advantage, Lieberman said.

"We've been optimized for auction; we love auctions and still support auctions," he said. "If you have a low start price, you have the best deal on eBay -- but the fact that people can sell at a fixed price on a platform fixed for auctions is a testament to our sellers."

The exodus of sellers from eBay isn't necessarily irreversible, King said.

"I think the move toward currying the favor of those larger players makes sense from a business standpoint, but in the transition, it's going to experience some aches and pains," he said.

Even the most loyal sellers can be chased off, King noted. "There is that danger. I think it's probably the sort of thing that we'll have to see over the next few months if there's a run for the exits by the sellers who've been there a long time. They're the ones who have been handling the actual face-to-face transactions."

Where sellers go, others tend to follow, he observed. "I'd expect them to try to take their buyers with them if they go to greener pastures."

New Opportunities

Still, the opportunities for new success are there for eBay, according to King. "I'd expect eBay to attract new classes of customers, with higher-value items."

It may or may not be a change for the better -- but some sort of change in direction is needed, he said. "The company has to go through [change] to become competitive in a rapidly evolving market."

eBay's shifting strategy is about growth, said Greg Sterling, principal analyst with Sterling Market Intelligence.

"eBay is obviously a public company and needs to tell its growth story to the market," he told the E-Commerce Times. "They have solid numbers and are one of the bellwethers on the Internet, but they don't have as much growth opportunity as they'd like under their current model."

The changes at eBay come in the wake of a change in leadership, as John Donahoe took over for long-time president and chief executive officer Meg Whitman last spring.

It's no coincidence, Sterling said. "I can recall regime changes where people had stayed the course, but it tends to be the case that new executives want to make their mark. The conventional wisdom has been that eBay needs to do some stuff to reposition itself, or grow, or whatever you want to call it."

Rivals have evolved, so it should come as no surprise that eBay would do the same, he pointed out.

"Amazon has managed to do very well -- in part through expanding its product line and introducing sort of buzzworthy things like the Kindle, which has done a lot to keep Amazon in the headlines," Sterling said, referring to Amazon.com's e-book reader.

"I think Amazon ... from a certain standpoint, has done a better job than eBay of keeping itself in front of people," he concluded, "but eBay is certainly a very solid company, and one of the things they continue to do is diversify."

Online Auctions, Part 1: The eBay Earthquake


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