eBay's Looming Identity Crisis

It seems that consumers are deciding that eBay's (EBAY) online auctions are too much hassle. That's not just a business problem for eBay, it's a deep corporate culture problem, like McDonald's (MCD) finding out people no longer like hamburgers.

I've been writing about eBay since its earliest days. The company's core has always run on the energy generated by on-line auctions. It wasn't just selling stuff like Amazon (AMZN) -- it was a game. eBay attracted certain employees, sellers and consumers because of the auctions. It's always been why eBay was different than any other retailer and different, too, from Craigslist or newspaper classifieds. eBay's TV commercials, even now, emphasize auctions and "winning" the item you buy.

But as Business Week reports, auctions my soon, for the first time in eBay's history, become the minority of transactions on eBay. The site's "Buy It Now" fixed-price transactions already make up 42% of all goods sold on eBay, and it's growing 22% a year. Consumers increasingly prefer to use search to find good fixed-price deals, instead of hassling with auctions. The auctions might be a fun game for a segment of consumers, but for a lot of people, an auction sucks up time and effort for a product you might not end up winning.

New CEO John Donahue may have a bunch of tactical issues to address, but if the decline of auctions threatens eBay's culture -- corporations have trouble recovering from that kind of mess.

Comments

[suki]

Buyers and sellers will continue to search for alternative buying locations until eBay is able to compete effectively with other sites. Since January, sellers have been hit with higher fees, reduced search visability, hassles from PayPal, and a broken feedback system. eBay is attempting to force sellers to offer free shipping; a flawed idea in that to do that sellers must pay a higher listing insertion fee and higher closing fees. If eBay seriously expects sellers to move to free shipping, their platform needs to be changed to include free listing so that sellers can adjust the initial price without incurring higher expenses. Buyers can't locate what they want on eBay thanks to best match and limits placed by eBay on the number of items that they'll display from individual sellers. In addition to the buyers that have previously supported eBay many buyers were also sellers. Their dissatisfaction with eBay policies has caused them to leave the site both as a buyer and as a seller. Other sites such as Amazon, eCrater and Google are actively courting sellers and buyers with friendly business practices. Until eBay can find a way to convince sellers and buyers alike that they're the fun, 'bargain' site that they once were, I would expect that their sales will continue to decline.

[jayjayjay1212]

I totally agree with Suki and this article in general. I used to be an avid EBay bargain-hunter a few years ago and was able to land many great deals on electronics and other high-MSRP (manufacturer's suggested retail price) items. However, the site's popularity surged, as did its fees and paypal-related charges, which increased the sellers' costs, and therefore, required sales price.

This translated into fewer bargains to be found, which reduced the ''active return'' for buyers who specialize in finding cheap products on Ebay. The costs (i.e. time and effort) of actively watching the auction now exceeds the benefits, since the spread between the price we would normally pay (on Amazon, for example) and the price we can find it for on EBay is lower. That is why many buyers just gave up on auctions and either stayed loyal to EBay (and used the buy it now option) or switched entirely to Amazon.com (like I did).

I'm not all too sure what EBay can do about it, since it will always suffer from the winner's curse; increased popularity (and therefore higher profits) leads to decreased appeal (and therefore lower profits). It can't rely indefinitely on its non-core businesses for generating growth and returns for its shareholders. Perhaps over the long term it might consider a merger with Amazon (now wouldn't that be something special?!), if of course it can pass anitrust rulings. The same questioning as the Sirius-XM merger would apply to this one I'm sure...

Interesting story to follow.

[hobo]

I agree with Suki,but I want to say I have been with ebay since 1998. I have bought and sold. I used to love ebay,but no more. They just keep changing,and changing,and never for the better. I put very little on sale now,and will probably stop all together. I may still buy a little, since if I dont like what I buy,I dont have to pay for it,and get positive feedback (imagine that)! I am sure something else will come along,its just too big for someone else not to pick up the ball. I am on Craigslist everyday now,and so far its great!!! I am starting to like it better than ebay,and I have met some real nice people face to face. I will not miss ebay when they are gone. I will miss the ebay of a few years ago,but not this one.

[JohnPseudonym]

My 5 year old is smarter than the CEO of ebay.

Last year we we're bidding on something she wanted.

I asked her how much we should bid.

She replied "$1000".

I laughed and said "$1000?", we can buy it at Target for $20.

She replied, "well, let's go to Target then"; and we did...

[JohnPseudonym]

I should also add the the reality of ebay in 2008 is that nearly any item I need can be purchased locally for the same or even less cost.

Ebay is only good for the odd, hard to find stuff. Of which the listings are dwindling because those listers tend to be small sellers and ebay is driving out small sellers with their insane policies.

Ebay is on it's way to becoming a mega-mart full of overpriced items I can buy locally for the same or less...not a good business plan.

[inagadadavidababy]

Don't go writing off eBay just yet. It's still all there and still has the best of both worlds. I've personally never had a problem searching and finding what I want on eBay. The problems and dissent has been coming from the new mass sellers trying to squeeze out a living selling on eBay like the pioneers did. They want it without any work or cost. Too many buyers were used to getting a super deal, but they want it without doing any research or putting any time into it. Also, there's a heck of a lot more buyers watching now, so more competition. To those, I suggest going to Amazon or Overstock and pay a little more or simply search for "Buy it Now" on eBay. The problem with most of those is they are mostly new items, and that's fine for those looking for that. From what I see, eBay's auction model is alive and well. If you can accuse them of anything, it's giving folks too many options, trying to please everyone, and that's what confuses new buyers and sellers. In this recession, folks are going to be cleaning out their basements and garages and putting it on eBay. Believe me, it's a heck of a lot easier and more profitable than putting on a garage sale.

[JohnPseudonym]

Actually, the opposite is true about cleaning out basements.

The buyer traffic at ebay has dropped to the point where going through all the trouble of listing stuff in your basement isn't worth the effort. Instead, people are going back to old fashioned garage sales.

[inagadadavidababy]

Possibly in your part of the country, but not what I've been seeing. Noticeable drop off in garage sales, and understandably when folks realize they need to fork out $30-$40 up front for a newspaper ad and betting on whether or not it will rain or their sales of 25 cent items will cover it. I see folks at garage sales looking for items they can turn for a profit on eBay. Digital cams and scanners have made eBay listings very quick and easy. Craigslist and Kijiji are booming also. Folks aren't willing to drive very far for sales. We'll see once the recession fully hits.

[Et tu,Brute!]

to inagadadavidababy and others:

I repeat: what recession? There is no genuine recession.

I also repeat: I am in my 50's. This economic stall occurs EVERYTIME a two-term President is leaving office and folks are faced with the unknown in Presidential leadership of the US of A. Once the elections are over and the new year begins with the new leadership, economy will begin to loosen up.

Happened with Reagan and Clinton. You can take it back more if you like.

Folks are simply cautious. There's no real recession.

[JohnPseudonym]

"recession hits"?

More like deepens...

=======

5 years ago, you could find people that didn't know what ebay is.

Today, you'll have a hard time finding someone that hasn't had a bad experience there.

[delta7777]

ebay scams have taken over, which can get very costly--lack of bidder identification and feedback changes have reduced buyer confidence....in general it is no longer worth the cost and hassle for either buyer or seller....