by Michael S. Malone
It goes without saying that eBay is one of the defining companies of the Internet age. Begun as one of a score of on-line auction sites, its unique business model (it left the transaction to the buyer and seller) and playful persona quickly turned it not only into a business giant — more than $8 billion in sales, 15,000 employees, and millions of items sold — but a cultural phenomenon. It took the notion of an ‘auction’ — once the rarified world of tobacco growers and antique dealers –and made it into an everyday activity participated in by hundreds of millions of everybody folks around the world.
But like many new technology-based services, eBay, though still hugely successful, has begun to suffer from its own success. The idea of participating in an auction — thrilling a decade ago to both sellers (who anticipated higher selling prices) and buyers (who thought they had an inside track on bargains — has lost a lot of its luster. What once seemed like an incredibly efficient and quick way to connect sellers with customers, now in our speeded-up world, seems like a time-wasting process of checking and rechecking bids and then lurking around the site as the auction closes . . .only to often lose the bid to some sniper equipped with special software.
Meanwhile, the rest of the Internet retailer world has caught up with eBay. These days, most on-line sellers offer an unbeatable combination of competitive pricing, convenience (one-click ordering) and a broad catalog of offerings. And no company has done this better than Amazon.com, which has taken its expertise in selling books on-line and slowly turned itself into the Wal-Mart of the Internet.
Not surprisingly, the once-explosive growth of eBay’s auction business has begun to slow; not just because of the fading appeal of on-line bidding, but also (one suspects) because, as the ultimate global garage sale, eBay has done a pretty effective job of moving all of the world’s attics into all of the world’s garages, and vice versa.
None of this has been lost of eBay’s management, from Meg Whitman to the company’s new CEO John Donahoe. eBay realizes that if it is to maintain its historic growth rates it must find a way to make the company’s service more appealing to sellers and buyers. Hence last night’s announcement: as part of its shift to more “Buy it Now” type fixed pricing, eBay is creating special special fees for fixed-price listings in its ‘media’ category (books, music, DVDs and movies, and video games), charging just 15 cents, and extending the standard duration of the listing from 7 days to 30 days. During a special promotion, beginning September 16th and obviously designed to give this new business model some momentum going into the Holiday season, that fee will be cut to just 5 cents. There are also changes being made to eBay’s final value fees in this category, which are enumerated here.
All of this is big news, of course. And eBay isn’t going to entirely abandon its auction model: it remains the best way to deal with high-demand items and in situations where the seller is unclear about the real value of the item being sold. But the real story here is that two of the biggest success stories of the Web 1.0 are now heading on a collision course — something no one would have predicted just five years ago. And it is unclear at the moment which one has the natural advantage. Is it Amazon, with its breadth of new product offerings and powerhouse delivery system? Or eBay, with its distinct culture, user-driven distribution channel and its growing ability to mix and match new and used items to offer each customer the best deal.
This battle is going to take a year or two to fully engage, but when it does (probably during the next boom) it will likely redefine both the retail world and e-commerce.
Digg This
del.icio.us
PJM Home
8 Comments
1. Pajamas Media » The Impending eBay/Amazon Clash:[...] Read the entire piece here … [...]
Aug 20, 2008 - 11:07 am 2. pete:I sell and buy hobby items every week on eBay…have for ten years. I buy books from Amazon now and then. I don’t see them being competitors. But I’d also have to say that it’s obvious that any large company such as either of these giants would not be able to maintain the growth rate it had as a small startup, or in its early years as a larger corporation.
Aug 20, 2008 - 12:19 pm 3. Dave:agreed. Growth rate is a false meter. If you’re profitable and you don’t go through actual recession, you’re a good business. Ebay will get bigger because the world’s population is getting bigger and because more and more people are going online every year. But no business can maintain an explosive, early adoption growth rate, no matter what the model.
Growth in the world, also expressed in terms of inflation, is usually between 3 and 5 percent. If you have a growth rate of 25%, by definition it cannot be maintained.
Ask any California homeowner.
Aug 20, 2008 - 1:54 pm 4. Wacky Hermit:eBay used to be a great place to sell “long tail” items, but then they made changes to the way their search works and to their fee schedule that really discouraged the sale of a lot of these items. Inexpensive items were only cost-effective to list as store inventory, but store inventory listings did not show up in searches, so you would have to run auctions (which last a week) on at least a few of these inexpensive items. But if you had a “long tail” item which wouldn’t sell every week, this often meant you’d have to sell at a loss once you factored in listing fees for both successful and unsuccessful weekly auctions, plus final value fees and PayPal fees on the items that did sell.
Consequently eBay has turned into a great place to go if you want cheap Tommy Hilfiger stuff (or whatever it is the young’uns are wearing these days), but if you’re looking for something low-priced, infrequently-sold, and hard to find, not so much.
Aug 20, 2008 - 3:59 pm 5. ApplePie:I disagree that auctions are losing favor - I’m a PowerSeller and my auctions this summer have been great!! I have had NO indication that buyers are sick of auctions!
I sell vintage & antique items - which by the way will be harder to sell now that ebay recently eliminated MANY popular vintage listing categories forcing me to list items in inappropriate categories.
Gee could it be that buyers prefer to purchase easily attainable items like books/clothes/videos on a quicker fixed price auction?? But, when it comes to antique items - by nature of the ‘antiquers’ - prefer auctions and the chance of getting a real deal on a hard to find collectible??
No doubt the category removals (mentioned above), constantly higher seller fees and ebays already etched in stone mind-set that ALL auctions are declining will eventually be a self fulfilling prophecy.
Ebay has, in recent years, produced a steady drumbeat of higher seller fees, changes to the feedback system which allow punitive feedback against only sellers and other orchestrations to drive out smaller seller - clearly this is more of the same.
Like many successful companies - ebay is losing sight of what made them unique and popular. Now ebay want to be one of a plethora of internet online seller.
I’ll place my bet on Amazon.
Aug 21, 2008 - 5:55 am 6. logdon:I live in Britain and buy and sell electric guitars and sometimes amps, all on ebay. It really is great from an international aspect, most of the guitars are high end Japanese which otherwise would be very tough to track down. So that for me is great. If I don’t like them I relist and recoup the cost. Strangely most sales then come from mainland Europe where it is obvious such great guitars at amazing prices are even more difficult to get hold of. The honesty of dealers amazes me as is the trust of buyers (often the guitar will cost over a thousand pounds yet they still sell). My gripe is the change in feedback as buyers can now indiscriminately and unfairly diss the seller which recently happened to me. However I’ve noticed a touch of pond life entering the fray, rude, grasping individuals intent on a fast buck or a purchase way below true value. They will be the ones who put the spanner in and as more get involved more fraud and dishonest descriptions will evolve. Ebay will be a victim of it’s own success. As for Amazon? Much better security. Mainly great dealers. And a lot cheaper on books and cd’s than the high street. It is all a portent of evolving consumer buying and more is in store.
Aug 21, 2008 - 7:19 am 7. Kile:All The internet buying and selling may come to a halt with Senator Christopher Dodds Sneaky Amendment to the Housing Bill that recently passed. The Federal government will now be recieving all info concerning electronic transaction over $10,000 a year or any transaction that number over 200 in a given year, start in 2010. The government has also forced Ebay to eleminate all transactions involving Check, Money Orders or Cash. With this invasive intrusion into Americans privacy, Ebay and the others may see a deep decline in users. Sellers and Buyers will now have to use online payment services like Pay Pal and with the risk of identity theft and hacking of government and business computers on the increase many users will simply not want to risk their Social Security numbers being stolen due to the failures of security. The old style garage sale and flea markets will soon make a big comback.
Aug 24, 2008 - 11:03 am 8. AnnieB:Why can there be just one?
There is more than one store in a mall.
People will buy at Amazon, at e-Bay, at CraigsLIst… wherever they want to go for a particular item.
With a good search engine - sometimes all at once.
Aug 24, 2008 - 9:57 pm