Has eBay hit its twilight?
Jim Higgins
http://tinyurl.com/5rne97
October 17, 2008: 5:58 PM ET
NEW YORK (CNNMoney.com) -- Ever since eBay (EBAY, Fortune 500) announced
significant fee and feedback changes earlier this year, angry sellers
have complained that eBay's new policies would destroy the businesses of
some of its longtime merchants. This week, eBay CEO John J. Donahoe
confirmed that those charges are true.
"Buyers are increasingly buying from the highest rated sellers and
buying less - in fact, they have stopped buying - from lower rated
sellers," Donahoe said Wednesday in a conference call with analysts
following eBay's third-quarter earnings release.
Donahoe cast that shift as a positive one for eBay. "We see clear
evidence that the site today is safer and easier to use than it was six
months ago," he said.
If so, it hasn't yet helped the company's bottom line. While eBay met
expectations for its third quarter, posting revenue up 12% from last
year to $2.12 billion, most of its growth came from PayPal and Skype.
EBay's core Marketplaces segment had a 1% decline from last year in
"gross merchandise volume" (GMV), a closely watched sales metric.
Company executives don't see that picking up this quarter: Citing a
sales slowdown across all business lines that began in mid-August and
shows no signs of improving, they cut their guidance for the fourth
quarter, typically eBay's strongest, and said revenue could come in
lower than in any other quarter this year.
Will 2008 go down as the year eBay, one of the dot-com boom's shining
success stories, began its twilight years?
"They've forgotten the base of their operation - the sellers," said Mary
Jones, a PowerSeller in Kansas who has sold beads and jewelry on eBay
since 2001. (Mary Jones isn't her real name; worried about reprisals
from eBay for speaking out, she requested anonymity.) "It's not a fair
selling venue anymore."
Like a number of longtime eBay sellers, Jones saw her profits drop off
sharply this year as a flurry of new policies took effect. A new
requirement that fixed-price items sell for at least $1 forced Jones to
group her beads, many of which sold 25 cents, into less profitable batch
lots. Then, a customer left her a negative review. EBay gives sellers no
avenue to contest such feedback; the reputation ding cut Jones' discount
on listing fees from 15% to 5%.
Under eBay's new system, buyer feedback significantly affects how much
merchants pay for eBay's services and how prominently it displays their
listings to users. Jones says that if she gets one more negative
feedback rating from a buyer, she'll leave eBay for good and move to Amazon.
That's a move other merchants also seem to be making. EBay's market
share went from 19% to 17% in the past two years, while Amazon's share
grew from 3.7% to 5.3% percent in the same time, according to a recent
research note from Morgan Stanley analysts. In Amazon's quarterly
earnings call in July, CFO Thomas Szkutak said Amazon's tally of active
sellers is up 18% from a year earlier.
EBay's user base is also growing: Its active user count hit 85.7 million
in the third quarter, up 3% from a year ago. Listings are way up,
increasing 26% from last year to 700 million in the third quarter,
thanks largely to eBay's move in September to make it much cheaper to
list large quantities of identical items. That's part of eBay's strategy
to offer more fixed-price items on its site, which remains best known
for its auctions.
But more items isn't translating to more sales: In addition to its
decline in sales volume, eBay had an 18% drop this quarter in its rate
of converting listings to completed sales.
"We do see buyers moving toward sellers with higher ratings. However,
this has not yet translated into buyers increasing their overall
purchases on eBay," Donahoe said during eBay's earnings call. "Our
current GMV trend is not where we would like it to be, but we remain
confident that the improvements we are making will ultimately move the
needle."
The improvements may "move the needle" for eBay, but they also risk
moving the seller community that built the site into an e-commerce
Goliath. Announced in January and implemented in stages throughout the
year, eBay's changes will take several more quarters to work their way
through to the company's bottom line. But each day, more anecdotal
reports pile up of vendors pulling up stakes.
Betsy Roberts used to make thousands of dollars each month from Betsy's
Boots and Saddles, a Cowboy boots retailer she ran from her home in
Oregon. In February, a wrangle with eBay and PayPal over a customer's
fraudulent transaction left her so frustrated she shut down her eBay
sales. Roberts tried out eCrater.com, a rival online marketplace, but
couldn't get the same exposure she had through eBay. In the end, she
donated her inventory of vintage boots to charity and went back to
working as a consultant full time. She doesn't expect to ever return to
eBay.
"They burned me once; they're not going to burn me again," she said.
--
Civis Romanus Sum
Jud
stonej
tiresome rule change after another mucking up the
whole process. Ebay decided they didn't want the little people
selling low value items anymore so they made it harder for
them to make money hoping to drive them away. I quit buying and
selling there in 2006 and don't miss it at all.
Bruce Remick
"stonej" <sto...@mail.lib.msu.edu> wrote in message
news:36816258-8205-4ecc...@k37g2000hsf.googlegroups.com...
I still enjoy eBay after ten+ years. It's just as much fun as it always has
been.... for me anyway. Since I don't rely on it for business sales, the
occasional rule and fee changes are no harder to accept than the inflation
we encounter in various other parts of our lives. I would never been able
to add so many scarce items to my different collections without it-- all
from a desk at home. And I've sold duplicate collectibles for retail-plus,
as well as other stuff that I might have thrown away before eBay. That eBay
takes a buck or two from my sale price is no problem to me and I still thank
them for this opportunity, venue, or whatever one calls it.
RWF
> "Buyers are increasingly buying from the highest rated sellers and
> buying less - in fact, they have stopped buying - from lower rated
> sellers,"
Well duh!
Finally eBay did something right (feedback changes) and the sellers are crying about how honest feedback is unfair to them.
Boo hoo!
>"They've forgotten the base of their operation - the sellers," said Mary Jones,
Sorry, Mary but the buyers are as important as the sellers.