Massucci's Take: EBay's plan to be more retailer than auctioneer is one risky bid
Filed under: Company News, Technology, Columns, People, Earnings, Wal-Mart Stores, Target Corp., Amazon.com, Inc.
EBay (EBAY) is a Web pioneer, having built a multibillion dollar business out of allowing people to essentially put garage sales on the Internet. That simple idea led to fast growth more than a decade ago and helped define what was possible online for other companies that followed. The company's IPO in 1998 turned founder Pierre Omidyar and eBay President Jeffrey Skoll into instant billionaires.Fast-forward to 2009, and the 1990s Internet darling is steering through turbulence. EBay seems to be want to be more an online retailer and less an online auction site. If it makes such a move, if will have to fight online retailers such as Amazon.com (AMZN) and Zappos and their impeccable customer service. It will also have to take on formidable brick-and-mortar retailers like Walmart (WMT) and Target (TGT), which are focusing more on online sales. Why does eBay want to join a battle it's not likely to win?
EBay CEO John Donahoe said the company is moving in the right direction. "While we still have a lot more work to do to improve trust, value, and selection, we are making progress," he said, during the company's third-quarter conference call last month.
He added that eBay is emphasizing its trusted sellers, who offer fast shipping and guaranteed returns. "For the first time, buyers who come to eBay looking for fast, trusted service, can easily spot top-rated sellers by the prominent badge in search results," he said.
Customers are noticing, Donahoe said. Buyers and sellers are also seeing more sellers peddling fixed-price items, rather than items for auction, which is how eBay built its brand.
Easy Returns
I'd argue that while its important to establish more trust on eBay, which the company seems to be doing, de-emphasizing auctions is a mistake. Why would you or I buy a new pair of boots on eBay for the same price as we'd buy them at Zappos, which offers returns for a full-year after the product purchase?
Granted, most people don't need to bother with returns. But if you're returning an item to Zappos, there are instructions on how to do so on its website and a toll-free number to call if you have any questions. Walmart.com allows customers to return their items by mail or to a store.
While most items are never returned, the perception of trust and safety is underlined by the return policies. With eBay, even from a trusted seller, the perception of trust by a buyer isn't as strong.
"What Donahoe has tried to do is make it more Amazon-ish, with a greater array of fixed-price offerings," says Fred Moran, analyst at Benchmark Co. "It might be that making it more like Amazon-like is the thing that saves them and helps them restore growth."
Moran says eBay faces an uphill battle against rivals like Amazon.com. "EBay's mousetrap is not as strong. How they compete with Amazon is the right question to ask. I don't know if Donahoe has the answer." Moran has a hold rating and a $29 price target on eBay shares, which is a 22% increase over Friday's closing price of $23.74.
Search Snafus
Investor Sandi Lynne says that while eBay's Internet payment service PayPal is adding revenue and the company is selling off its Web-calling service Skype, eBay needs to focus on improving the search function on its site. "If I'm searching for something specific, it gives you too much stuff in addition to what you asked for," says Lynne.
When she searched for a Mercedes X600 on eBay Motors, she got the Mercedes emblem, the wheel rims, the original owners manual, yet she wanted only a list of the available cars. "That's why eBay is doing worse that ever before," she said. "The more you try to refine the search, the more likely you are to have it tell you your search yielded no results. Amazon's search is the opposite."
The more eBay morphs into an online retailer and gets away from its roots as an online auction site, the more likely it's fighting a battle it's going to lose. While it's important to establish trust among sellers and buyers on eBay, trying to compete with Amazon or Walmart and their online guarantees is a waste of time. Even if eBay can match the services offered by other retailers, why would a buyer chose to shop there?
EBay's strengths are in the variety of old, hard-to-find collectible and discounts on new items. That's why people shop at eBay, and if the company moves too far away from that core identity, it may never rediscover its mojo.
Anthony Massucci is a senior writer and columnist for DailyFinance. You may follow him on Twitter at hianthony.
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Reader Comments (Page 1 of 8)
11-15-2009 @ 3:56PM
Patricia013 said...
"EBay CEO John Donahoe said the company is moving in the right direction. "While we still have a lot more work to do to improve trust, value, and selection, we are making progress," he said, during the company's third-quarter conference call last month. "
Hey folks.....that was last month. This month finds Donahoe needs small sellers once again (the revenue just ain't there otherwise) and he's offering collectible sellers half price listings for the next two weeks. Then Auctionbytes.com uncovers a survey that will lead to changes in the feedback and DSR, TSR programs. Is Donahoe reversing his steps? Well....if he has half a brain he should have been reversing them six months ago. There is NO competing with Amazon right now...29 percent rise in sales compared to ebay's constant decline in sales should scream that at the man! The diamond sellers he has brought on board have miserable sell thru rates, pay little or no money in fees and seem to be there advertising their own sites and stealing buyers away from Ebay! Ebay right now needs a fresh start - new management - nothing less will bring back the good small sellers and their buyers! It is now evident that Donahoe will go down with the ship rather than ever admit he was wrong and his plans are just NOT working. It seems every quarter he blows more smoke up your skirt and the analysts fall for it! The company's sales are DECLINING - no getting around it! The board of directors better set him sailing on his golden parachute, call it a loss and bring in a management team experienced in online sales, sellers and their needs...buyers and their needs. That's the only thing that will keep this ship from sinking! Sellers have been saying that for almost two years now and whether anybody wants to listen...they've been right all along!
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11-16-2009 @ 2:42AM
mickey said...
Donahoe ruined Ebay. I've been on ebay for 10 years and it was fun, exciting. It was allowed to run itself. A few sellers would overcharge on shipping but feedback took care of that. Feedback was a two way street and kept people honest. There were more auctions and less fixed price listings. I'm telling you, Donahoe ruined it. There are a lot of items listed now but its because some big outfits list 5,000 of the same item. Its no good, the alienated the multitude of sellers because they want to be Ebamazon. Who needs it. If they don't start reversing their mistakes, Ebay will be done for good .
11-16-2009 @ 4:49PM
PembertonFred said...
Ebay has sold out to Chinese manufactures who want to market directly to the end user.
They slowly but gradually pushed the small, but loyal sellers out of business. The little guys who made them billions of dollars.
It makes no sense.
I don't know anyone who has been associated with the site for a long time that is happy with the way it is managed.
Most of the people I know who used to sell items on EBAY to supplement thier income have stopped because it's just gotten to expensive.
11-16-2009 @ 7:01PM
Mike said...
I have been on Ebay for 9 years,3500+ feedbacks. I have one negative feedback. I sold a disc drive to a guy who said it didn't work. I said send it back and I'll pay the postage both ways. He said he sent it. I never received it. He said give him his money back or I'll give you a negative feedback. I said, when I get it back, I'll give you your money. I never got it back. PayPal refused his claim and I kept the money. He gave me a negative feedback stating I never refunded his money for a returned item. THIS IS HOW SCREWED UP EBAY IS. PayPal, which is owned by Ebay, let me keep the money for the auction, BUT EBAY LET HIM POST A NEGATIVE FEEDBACK CALLING ME A LIAR. Now, is this scenario the epitome of stupid negligent incompetent management or what????????
11-16-2009 @ 8:20PM
BUD said...
I AGREE , THAY HAVE MANAGED TO DAMAGE RELATIONSHIPS WITH SELLERS. I KNOW THERE ARE BAD SELLERS,BUT THERE ARE EVEN MORE BAD BUYERS THAT THE DEFEND. {NO NEGATIVE FEEDBACK} SELLERS GET RIPPED OFF .PAYPAL STANDS UP FOR THE BUYERS. I HAVE BEEN RIPPED OFF BY THIS SEVERAL TIMES . IN THE OLD SYSTEM IF YOU GOT A BUM CHECK YOU COULD TELL OTHERS. I HAD A FLORUSA SCAM PERSON SEND ME A BANK CHECK RUN THRU A COPY MACHINE. THEY DID NOTHING I FOUND OUT THIS DIRTBALL DID THE SAME TO AT LEAST 3 OTHERS BEFORE THEY SHUT HIM DOWN. ONE INVOICE WAS $2200.00 THATS ONE HELL OF A BITE. , I WENT PERSONALLY FROM 150 AUCTIONS WEEKLY TO LESS THAN 20. YOU WORK HARD FOR PEANUTS AND EBAY RIPPED ME OFF.
11-15-2009 @ 6:16PM
CMM said...
I just do not get it. NO ONE does online auctions like Ebay did. They were unique in that area and no one could compete with them. The biggest problem was the scammy sellers and they have gone a long way toward cracking down on the invidual ones. It seems like every "improvement" they have made over the last few years makes the site harder to use and less friendly to both buyers and sellers.
I wish they would open a side site as a test, call it "Ebay classic"--all auctions, no special deals to big companies, no Buy.com, none of the clutter. Crack down on the big systematic fraud stuff and keep newer rules against things like keyword spamming. But otherwise let the market police itself--if there are sellers running penny auctions but $20.00 shipping, let feedback drive them away. And have a bigger staff monitoring auctions and handling complaints and a smaller one thinking up refinements and improvements. Make it simple and fun again for the small sellers and buyers. I bet people would flock to it. I would. I used to sell and buy on Ebay every week but it's become so hidebound and clunky to use that I have stopped doing both.
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11-16-2009 @ 6:27PM
E Harris said...
I LOVED Ebay when it was truely an auction site. You could find pretty much anything. I spent hours and hours and buying and selling. Then shipping prices went nuts. Even worse was when they opened the Ebay 'stores' with the 'buy it now'. This totally took out the auction business. Why would anybody try to sell a (ie) book when there are 50 Ebay 'stores' already listing the book with a 'buy it now' price of 2.00? It was a waste of time for me the last time I tried to sell anything. I did better just donating it to charity.
11-16-2009 @ 11:04PM
Sandra said...
I totally agree with you.
11-15-2009 @ 11:19PM
hdstyle1957 said...
I have bought and sold on Ebay foir a long time. The more they try to make it better the more they screw it up. One of these days maybe they will relize that.
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11-16-2009 @ 3:07PM
Kari said...
You are sooo right! Every change they institute makes it harder to do business on the site. Plus, they've made it all but impossible for those with dialup to use. And they're arrogant about it! It used to be a pleasure to use and to search for items. Now, it's a chore, and I use it way less than in the past.
11-16-2009 @ 5:25PM
TLBothel said...
I agree. I have been selling on ebay for over ten years and in the last two, the changes have made it harder to do business. I sell low price items for myself and my friends and never use the buy-it-now function. According to ebay rules I can no longer offer check or money order as a payment option; my buyer and I have to use PayPal (which is owned by ebay) and the trick in changing the final value fees causes a higher percentage for lower dollar items. I don't sell high dollar items on ebay; I start my auctions at $0.99 and on occasion I do end up selling high dollar items (recently sold a Mark Twain cdv for almost $400), but these are anomalies. Most of my items end up in the $1-$5 range. If ebay takes away my ability to sell, where do I go to sell my items?
11-16-2009 @ 5:25PM
TLBothel said...
Also, you can no longer leave negative feedback for a buyer who has stiffed you. In the old days, if someone did not pay or there were problems with the buyer, I could leave negative feedback after trying to resolve the situation. Now only the buyer can leave negative feedback. The old feedback system worked much better than the new seller rating system that is in effect. Feedback should be able to go both ways.
11-16-2009 @ 5:33PM
ThisIsNuts! said...
TL, I agree with your comments. If you are just an individual trying to use ebay the way it originally began, you are out of luck. (This sound like an ad, but I SWEAR it's not!!!! I just don't know how to reach you otherwise, and you may read this.)Overstock.com has their own auction site. You might want to check them out. Also, they don't force you to use paypal. Ebay just got so big, so fast, and like someone else said, greed took over.
11-15-2009 @ 11:20PM
JEFFREY said...
GREED will get you everytime ---EBAy is an auction site and the best one around despite their lack of customer service for sellers, the fact that they give no phone contact number, and the fact that the buyer is always right according to them ...........Paypal has to be a cash cow for them so why cant they just stick to what they do best ---they invented it ...so why can't they enhance it reather than try to venture out against sites that do it much better than them ..Donahoe wouold be a much smarteer CEO if he focused on his already huge audience---how can he expect to compete with Zappos that offers free shipping both ways in case of return and Amazon does it with minimum based orders ................EBAY can do it if they foot the bill for the shipping ---chances of that are slim to none...not to mention the increase in staff that would be required for customer service
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11-16-2009 @ 2:34PM
Bud said...
JEFFREY said:
...the buyer is always right according to them ........
--------------------------------------------------
That is not the experience I had. I bid on and won an item for a whole couple of dollars. The seller's pay system for some reason would not accept my credit card, despite attempting about a dozen times to pay. Nor would the seller respond to my messages. After time expired the seller simply told eBay I did not wish to pay for the item, and I got a "black mark" against my account. I steered completely clear of eBay for about three years after that distasteful incident.
11-15-2009 @ 11:36PM
b said...
E bay is nuts these sellers buy this stuff from who ever say like walmart. you can buy it at the walmart price or a little highter. then you have to pay crazzy shipping. im going back to walmart.E bay stinks now
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11-16-2009 @ 3:20AM
H said...
When it comes down to online shopping, you do not have to deal with wasting your time sitting out in traffic to get to the one store you need to shop at. And if they do not have the item(s) you want, it's then traveling from one store to another for the products you need. Your time wasted in that is worth more than you know. Plus, then you have the gas expense on top of the vehicle maintance along with dealing with the parking lots, the sales people, any rude public members who do not know how to behave and any perverted serial killers lurking around shopping centers. On top of that, you do not stand, wait at long check out lines to purchase your tiems even at the self check out stations when you can have them delivered right to your front door.
11-16-2009 @ 12:09AM
michaelbwestman said...
Ebay is killing the goose that laid the golden egg....they are marginalizing the little guy who used this to create a market that was good. They want to compete with established e-retailers who have a head start and have de-kinked the system....they are also relying on independent people who are slowly becoming fed up with their corporate dictations and mindless regulations that are killing the little guy,....anyhow they aint got no soul and time will show that this will be their death knell
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11-16-2009 @ 12:34AM
Carolyn said...
Ebay's main problem is Paypal. That service is so unorganized and so unwilling to admit the mistakes it is making that it is turning off both buyers AND sellers. There is no efficient way to contact a live person without first dealing with a robot answering service. If you get past that the reps can't answer your questions and pass you along to another rep until finally some supervisor makes up a story for them to tell you just to get you off the phone. Their forum reads like a "who's who" of clients who are getting ripped off by their policies. None of this is making Ebay look good.
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11-16-2009 @ 1:00AM
ps said...
Ebays idea that they have great sellers is about as accurate as poo-poo. Out of 5 items I last purchased 4 dont work and were a waist of my money. The store said no returns. It takes forever to try and get a person, on paypal, but have you tried to get a person on ebay!. No luck, you might as well be the poo-poo. Selling is also a rip. Hardly anyone looking at items will pay more then from to ten to $100. I sell and collect dolls. No one is buying and the fees keep getting taken. It isn't anylonger a great place to put merchandise. I have been checking other sources
I have been waiting to see if it picks up around the holidays, but so far no luck. They need to go back to their basic idea. Alow people to sell what they don't want in an auction.
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