eBay’s New Strategy: What Was Once Old is New Again
Written by Matt Pace (contact - e-mail) -- March 17th, 2009 | Share - Save - E-mail
At web giant eBay, it’s out with the new and in with the old both in terms of corporate strategy and product mix. After trying in vain to remake itself as an online “retailer” of fixed-priced items to rival the likes of Amazon.com and Walmart, eBay last week cried uncle when it announced it was returning to its roots as an auction clearinghouse for used goods and collectables (in addition to overstocked items). Why the change? The past year has not been kind on the one-time darling of the web which has seen its traffic and fortunes decline.
To compete in the fixed-price marketplace, eBay enacted a series of policies and site changes that favored power sellers at the expense of smaller sellers. As casual sellers abandoned the site, buyers have migrated elsewhere in search of the hard-to-find products upon which eBay built its business—traffic to Craigslist has risen 40% over the past year. In contrast, eBay’s traffic was down 5.2% last month over the previous year, while Amazon’s traffic rose 18.7%.
Not only are fewer shoppers returning to the site, but average order values have stagnated at around $28 (other than the spike during the holiday season.) Since eBay’s marketplace revenues are driven by fees charged to sellers, declining traffic and flat transaction values have led eBay to raise its fees in hopes of meeting Wall Street’s expectations. As a result, eBay is squeezing the very sellers on whose backs the success of its business rests.
The more eBay has tried to be a retailer, the more its customers have gravitated to sites offering better overall shopping experiences with lower total prices, better customer service, and predictable deliveries; not to mention the avoidance of the risk of fraud. The percentage of eBay’s visitors who shopped at Amazon jumped from 41% in February 2008 to 53% last month. Over the same period, Amazon visitors’ cross-shopping of eBay has remained unchanged at 58%, suggesting eBay’s fixed-price strategy has failed to attract significant numbers of new shoppers to the site.
By focusing so much on fixed-priced items sold by large sellers, eBay has blurred the distinction between it and the litany of shopping comparison sites and tools on the web (such as shopping.com which eBay also owns). In so doing, eBay has traded away much of the brand equity that once set it apart from the rest of the online retailing universe.
With its greater emphasis on fixed-priced goods, it’s not surprising that eBay has seen a steady increase in the number of shoppers making “Buy-It-Now” purchases over the past year. In February, 11% of eBay’s visitors, or 7.8 million customers, made a Buy-it-Now purchase (up 20% from the previous year). However gains in fixed-priced activity have been eclipsed by declines in eBay’s traditional auction business. The percentage of eBay’s traffic that made a bid on an auction-style listing dropped from 13.5% in February 2008 to 12.2% last month. In total, 1.5 million fewer shoppers placed a bid on eBay last month than did last February.
eBay’s challenges are multi-faceted, and it remains to be seen whether by simply returning to its roots as an auction site it can win back buyers and sellers who have long since given up on using the site. Online retailing has evolved significantly since eBay was founded over a decade ago. Savvy consumers have learned how and where to find deals online, but value intangibles beyond price when making their purchase decisions. Consumers expect a level of service that in some respects is beyond eBay’s ability to control in its role as middleman. Given that, eBay would be better served looking beyond product strategy and focusing instead on improving the shopping experience for buyers and sellers as its constant tinkering seems to be doing more harm than good.
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March 17th, 2009 at 6:24 pm
The $34.35 in Nov 2008, IMO, is due to eBay subsidizing purchases via their coupons (e.g. Microsoft Live.com cashback, up to 30% at one point). I think one factor maybe eBay neglected is that… although auctions require more traffic to convert in a single sale, the “mindshare” you get with all the eBay bidders constantly visiting the site has to be good for business. If you’re constantly on eBay, then you’ll remember to buy a fixed good item on the site next time instead of going to Amazon or Google.
March 18th, 2009 at 10:38 am
Took the words out of my mouth there at the end. eBay has become too big a corporate and treats it’s visitors and customers like it’s own employees. There’s a dozen rules for everything. It’s scaring away the little guys. eBay would be well advised to junk the legal mumbo-jumbo and just let it rip like before.
March 18th, 2009 at 11:50 am
Additional perspective on eBay’s recent moves from RetailWire’s team of industry experts can be found here:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13611
March 18th, 2009 at 11:53 am
Once again I see this exact same article I saw yesterday at another URL….and once again I will correct it!!! Lori Norrington on Analysts Day explained: “our future product will no longer come from attics and basements – it is sitting out in warehouses. ” Absolutely NOTHING was said about bringing Ebay back the way it was and into the hands of small sellers again. What was said is that Ebay will flood its listings with end lots and discontinued items and special large liquidators will do the listing. Once again, the small sellers have been shoved to the side. For goodness sake I sure wish you people writing these articles would do just a tiny bit of research and get it right!
March 18th, 2009 at 12:52 pm
@Patricia013
We could argue what the term “used” means, but clearly stated on the call was the eBay is going to bank its marketplace going forward on overstocks and not-new products. In other words they are no longer going to try and convince shoppers that eBay is a retailer.
If my article read as though I interpreted the comments last week as a complete reversal back to the days of small sellers dominating the site with collectibles, it was unintended. I completely agree with you that the changes eBay is implementing will further alienate small sellers (and buyers alike). That in fact was the the overarching angle of the article, and I’m sorry if you took exception with the headline or first paragraph. I trust, however, that you read the entire piece when forming your opinion as to the thoroughness of the research.
March 18th, 2009 at 12:54 pm
eBay needs to undo the last 4 years worth of useless strategies and changes, and to guarantee that it will adhere to the major ambition of being the number 1 auction site in the world for the next 50 years. Let them do again what they did best and let others do what they do best also. Anyone with an ounce of common sense could see their strategies were just plain stupid.
March 19th, 2009 at 10:03 pm
eBay forcuses neither on the buyer nor the seller. The Best Match makes a lot of sellers echausted. Meanwhile, the buyers aren’t benifited from the BM much. We use free P&P, so the final price rise. We use featured plus, featured first or other listing promotion to make our listing outstanding. Look, eBay is the winner. It succeeds in charging more fees from seller. But this definitely is a short-sight action.
March 21st, 2009 at 1:35 pm
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March 24th, 2009 at 10:54 am
I find that I was a huge ebay user up until 1.5 years ago. Why did I stop? I stopped because of the bait a switch that the vast majority of pro sellers do with shipping. The price of shipping is for the most part outrageously high. The sellers bait you with the low price and knowing that a lot of people don’t weed through the detailed costs then hammer you with a price of shipping that quite often rivals the item price.
I have switched to craigslist.org for two reasons, better user experience and no shipping fees. If ebay can pressure its power sellers to stop gouging on the cost of shipping I believe that people might start buying again. Although that is tough because once a site looses its users it is next to impossible to get them back.
March 24th, 2009 at 7:21 pm
Why is this news? We told them a year ago what was going to happen. They ignored us. Now what we said would happen, has happened. They’re finally starting to notice.
eBay still sucks, and Donahoe still needs to be fired.
Sign me,
Still boycotting victoriously!
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April 16th, 2009 at 4:44 am
hello..im Danny
i have a question..
is ebay’smove from apure consumer-to-consumer auction marketplace to inviting large and small businesses to sell to consumers and other businesses, sometimes at fixed proces, a good long-term strategy? what do u guys think? i need the answer… im full of curiousity about eBay..thanx =D
May 13th, 2009 at 11:54 am
Hello: I have been an E-bay seller since August 2000 and I am just about fed up with E-bay and Paypal. They seem to be the only ones making money on this site and it all comes from me the seller. The fees are ridiculous and there are so many different extras fees that it makes you sick. The buyer sits back with their feet up while the one doing all the work (THE SELLER) pays pays pays….. There was an inccident that I had recently that was almost a crime in my view. I sent out a group of 4 lps to a winning bidder in Europe. The winner did not want to pay for AIRMAIL and requested SURFACE MAIL. I stated that I preferred to ship Airmail for quicker safer delivery because of less travel time and less time for any damage to occur. I shipped out the LP’s surface mail and contacted buyer to let him know they are on the way and that they would take 4 to 6 weeks to arrive. After 3 weeks in the system, I received an e-mail from the LP’s winner wondering why his items have not arrived yet. I explained to him again that it would take a little longer than 3 weeks to arrive. Just shortly after sending him that mail, I received a notice from PAYPAL that they were withdrawing his payment from my Paypal account and holding it until he receives item. The buy who pays nothing to E-bay or Paypal gets his ass kissed while the seller gets a slap in the face. E-bay is alive and still running because of the SELLERS and they are contantly being controlled, disrespected and abused. Its no wonder that E-bay is failing and will soon Fall.
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May 21st, 2009 at 11:46 pm
What I can’t understand is why a company would take something that was working so well and totally screw it up. Their “innovation” talk was just a smoke sreen for their greed. They are paying the price for it now. Too many people are leaving them, and after the way Ebay has treated us sellers like we are trash and so disrespectively, I know most pf us will never return no matter what. They forget that sellers are buyers also, and deserve what they have coming to them.
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