Do All Roads Lead to EBay?

With all the attention that EBay (Nasdaq: EBAY) has devoted to building fixed-price sales on its site, one might jump to the conclusion that the Internet auction giant has dramatically changed its mission.

The fact is, EBay remains first and foremost an auctioneer, according to analysts and company executives. However, the fixed-price push is helping EBay solidify its position as an open, online marketplace — while at the same time positioning the company for a challenge to Amazon.com (Nasdaq: AMZN) in the third-party e-tail market.

“Auctions will always be the sort of centerpin of whatever EBay does,” Forrester analyst Carrie Johnson told the E-Commerce Times, but “fixed-price goods are rising in importance” and may help power the auction business even further.

Johnson predicted that mainstream consumers who are reluctant to dive into the online auction market might build a “level of trust” for EBay through their fixed-price sales.

EBay’s fixed-price operations now account for about 16 percent of sales on EBay, company spokesperson Kevin Pursglove told the E-Commerce Times.

Those operations include subsidiary Half.com, the “Buy It Now” auction feature that lets buyers choose to pay a set price at the outset instead of starting a bidding war, and the new “storefront” section consisting of third-party vendors setting up shop on the EBay site.

Fixed-Price Push

“We see growing use (of the fixed-price format) by sellers and buyers,” Pursglove said. “EBay Stores is perhaps the latest step in that evolution.”

Buy It Now is now featured in nearly one-third of all EBay auctions, according to Pursglove. In addition, EBay has accelerated plans to integrate Half.com into its overall operations, though the company is still deciding how the merged product will look.

“The idea will be to have one brand,” Pursglove said. “Exactly how we’re going to integrate that brand and how we’ll integrate the listings into EBay has yet to be determined.”

Showing Some Half-Life

Morningstar.com analyst David Kathman told the E-Commerce Times that “Half.com is continuing to grow pretty nicely.”

Gross merchandise sales at the division were up 44 percent from the second quarter to the third, and listings were up 15 percent, Kathman said.

Though the offerings on Half.com are “not quite as diverse a bunch of stuff as on EBay proper,” Kathman said, “they’ve added a lot of categories.”

Challenging Amazon

As a result, EBay is moving into position to go head-to-head with Amazon in serving brick-and-mortar retailers that want to get more online business.

“I think there’s room for more than one player in these areas where Amazon and EBay are butting heads,” Kathman said.

Kathman believes that storefront-type arrangements hold big potential for both EBay and Amazon, which runs a similar operation called zShops.

“Obviously a corporation has more stuff to sell than somebody selling comic books or Beanie Babies out of his garage,” Kathman said.

Untapped Businesses

Providing a platform for big companies to sell surplus merchandise, or for smaller, less Web-savvy ones to get into e-commerce, can be “pretty lucrative,” according to Kathman.

“These are the sort of peripheral things that could become much bigger, and they’re both trying today to lay the groundwork for much bigger doings in the future,” Kathman said.

In some ways, said Kathman, EBay may have the upper hand over Amazon, which like most e-tailers is still struggling to turn a profit. EBay is “in a more stable position, business-wise,” according to Kathman.

“They’re already profitable,” Kathman said. “They’ve got plenty of money.”

EBay’s Evolution

For its part, EBay believes it will build on its past successes, even during an overall economic downturn.

On October 18th, EBay reported third-quarter net income of $18.8 million on revenue of $194.4 million. Company officials said on a conference call that day that EBay expects to do even better in the current quarter, as businesses seek to get rid of unwanted merchandise and consumers look for bargains.

Pursglove acknowledged that while EBay started out as an auction site dealing mainly in collectibles like Beanie Babies, it has grown to the point where collectibles make up less than half of all merchandise sold.

“As more and more people come to the site with different expectations, they’ve really engineered it so it works best for their particular circumstances,” he said. “EBay is essentially a liquid marketplace.”

12 Comments

    • Tom, I would be curious to know if you buy or sell on eBay. What kind of experience do YOU have to make this ludicrous statement? I have been an eBay member for over 4 yrs. I started out buying. I AM now mostly a Seller. Do I look in my closet for my merchandise? No! I have a tax resale ID, and sell new items. My customers don’t seem unhappy with what you might call “junk”. Am I following the “rest of the sheep”? No! Neither are a lot of eBayers. I AM not going to accept Billpoint/eBay online payments, after this insane Checkout feature was added. This also means that I will never run 1 single AFA again.

      I think you should research your comments before posting.

      • Tom,

        I politely disagree with your sentiments. I don’t own any Ebay common stock but I will when the P/E drops low enough. Ebay’s projected annual sales by 2004 are $5B. Currently they’re $663M. Normally I would scoff at such seemingly ridiculous projections; however, Ebay’s one of the very few “new economy” companies that actually is turning profits (and that hasn’t filed for Chapter 11).

        On top of that, Ebay doesn’t need 10,000 – 20,000 employees to rack up those enormous sales figures either. Ebay has a mere 1,927 employees.

        Ebay does not need “brick and mortar”. They don’t need warehouses. They don’t need plants. Such physical entities eat away at profits. Ebay’s expenses are incredibly minimal.

        I know kids in their early 20’s that managed to put themselves through college using only Ebay. They could end their auctions late in the week, package the products during the weekend, and ship the products on Monday, before their first class.

        This certainly beats working at a retail store or fast food restaurants, as most young people do, where your manager sets your hours, and either you work those hours or you’re fired.

        Current Ebay shareholders will be laughing all the way to the bank before I’m 30.

        Jeff

        • L.K.,

          There is nothing ludicrous about my statement. eBay IS full of JUNK. I know many people who laugh at the stupidity out there. Why? Because they are selling their junk.


          Why go to goodwill and get a tax write-off on that old chair when some shlub will give you cash.


          So you have a tax resale id, How much did that auction cost you. You refer to your customers as if you are Ray Kroc, how many do you have? What is it that you are selling?


          I have seen a lot of new junk sold at garage sales. “I never used this 1968 ice cream maker, so I’ll let it go to you at a reduced price. blah, blah, blah


          You’ll still go back to eBay because there is no other real place to go.

          • Jeff,

            I never said that Sanford and Son (oops, eBay) is not making money.


            Everyone wants a way to get rid of their junk, and eBay is one way to do it.


            They even have a commercial that discusses it. THe one where the husband buys an ugly lamp from his wife.

  • The only people that are upset by this are the junk mongers who empty their closets/garages and try to foist their garbage on unsuspecting buyers.

    The site should really be called “Other people’s Junk.” When I was a child my parent’s took me to the brick-and-mortar version, it is called a “Swap Meet.”

    I AM so very AM used by the complaints. Big bad eBay is making it difficult for me to sell my children’s broken toys. I can’t sell my picture of dogs playing poker waa waa waa.

    I’d rather play in the street than listen to this nonsense. eBay can do whatever they want and their sheep will follow bleating all the way.

  • I’m not an eBay user, and I have no reason to dispute any of the recent message board postings on the eBay article. But I think there are different issues here. Whether or not eBay is listening to its community (assuming these message board postings are representative), the company seems to be a financial success.

    I’m not talking about whether that’s morally right or not – and I’m not saying what’s morally right isn’t important. I’m just asking this question:

    Does eBay still have a financial incentive to listen to the community complaints about Checkout?

  • Ebay is in the process of creating their biggest corporate blunder since they started up. CHECKOUT is driving sellers (and buyers) away in droves. Their FAILURE TO EVEN ACKNOWLEDGE that there is a problem is infuriating even more. I normally will list 10-30 auctions per week, with bidding off so sharply since this began, I now have only 2 auctions and they are basically protests. Think you need to do another interview (including some ebay community members) and get brought up to date!!

  • “….”level of trust” for EBay”

    An oxymoron if I ever heard one. eBay is doing all it can to drive away any level of trust they had left by giving us “Checkout”. Ask Pursglove what OPTION means. Take good look at Checkout forum on eBay.

    Carol

  • One point was missed here…

    1) eBay has consistently failed to respond to its own “community.” They make changes that only a handful want, ignoring the thousands of users who voice their concerns against the changes. The latest is a feature called “Checkout”. While eBay swears it is optional, they have apparently rewritten the definition of “optional” as this feature appears on ALL auction pages regardless of the seller’s choice.

    More on this can be found here:

    http://forums.ebay.com/dws?14@73.PbyhcVEbxEP^1@.eed08f5

    Trouble is, eBay seems to be turning more and more to BIG business and completely forgetting the small Mom & Pop types that made them what they are today. Yes, this looks good on paper, in $$ anyway, but many of us started on eBay when they were just beginning. Had we not been there, eBay would have remained just a dream. Now that they are big, we don’t seem to matter anymore. How sad.

  • What a crock!!!

    Ebay is in a position to push all small auction sellers out of the business.

    Their latest feature “Checkout” takes the sale and control out of the hands of the seller.

    Wanna’ know whats really going on visit the post boards at eBay.

    The truth is out there.

  • There is a full blown revolution in place at eBay. Sellers and buyers are angry over two major issues: The mishandling of the Auction for America Auctions (where eBay takes credit for the sellers donations and the collected funds have NOT been turned over to Charity) and their most recent fiasco called CHECKOUT. Visit the eBay Checkout message boards for more information.

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