While the forecast calls for pain, the long-term health of the auction giant is stable, plus announcemements from PESA.
And, those concerns, right now, are many. For instance, sellers are complaining about the drop in sell-through rates and prices realized. Steve Grossberg, a longtime video seller, sums up the dilemma faced by many eBay sellers, "it now takes four tries to sell what used to sell in two." Further, what sells is selling for less: eBay's average transaction revenue declined 10 percent to $1.64 over the past year, according to Mark Mahoney, Citigroup Global Marketing analyst. Others claim they can make more money selling off eBay. According to a Wall Street Journal report, in 2000 Tom Hawksley began selling CDs and DVDs on eBay. By 2004, he began selling on Amazon and found he could get $35 for DVDs of TV shows that would only fetch $10 on eBay. (Analysts claim prices are higher on Amazon because the site attracts wealthier shoppers.) "Ebay shoppers are looking for unreasonable bargains," Hawksley said, claiming to have generated more profit in four months on Amazon than he did in four years on eBay. His success is echoed by many others, particularly those with their own Web sites who use Google text ads contracted through Amazon and Yahoo! steering in anyone surfing the Web using words related to their businesses. Many maintain there is a growing gap between eBay's registered users and active users, those who bought, bid or sold something on the site within the past year. Further eBay can be a crap-shoot from the sellers' perspective depending on who is surfing the site at any given time. Frequently, one-of-a-kind items that fail to attract the minimum bid on the first listing will sell for multiples of the minimum on subsequent tries; (the re-listing sell-through rate for this seller averages 40 percent.) "It's impossible to compete with somebody who is not trying to make money," one eBay seller complains, referring to the "one cent wonder" and other low-ball sellers who discount 90 percent or higher, then count on making money on shipping, often gouging the buyer with high shipping charges. With exponential growth, eBay has seen a glut of such sellers. eBay's flip-flop on Stores, seems to have riled everyone. In February, 2006 the company made Stores searchable as a means to give the fixed-price venue more exposure, to the consternation of auction sellers who felt the pinch of added competition. By July, eBay realized the move had backfired and backtracked, announcing an increase in Store fees by a hefty 25 to50 percent for most sellers, that began Aug. 22. "The marketplace has been overwhelmed with identical, poorly-priced items that have diluted the magic of the eBay experience," Meg Whitman commented regarding the increase, stating further that "the rebalancing of the marketplace" was designed to drive Store sellers back into the auction format. The results have been mixed for eBay, as some Store owners moved on to different venues and/or developed their own Web sites. According to the auction watch at powersellersunite.com, (founded by eBay sellers in early 2005 in protest to a fee increase,) the next 10 players beneath eBay auctions are approaching an aggregate market share of 20 percent. Markets Mature but Still Making Gains
But is the sky really falling on the eBay empire? Despite the substantial drop in the stock price, eBay is still a Wall Street favorite. Most analysts, looking past the three to six month short term, see eBay's prospects as very good over the next several years, citing healthy price to earnings ratios and other criteria compared to competition. While eBay's year-to-year listings growth in the U.S. market was "just" 19 percent in the second quarter of 2006, this is a figure that nearly all dotcoms would die for. As one analyst put it, "they are so good they're bad." Meaning that merely outstanding results look tepid when applied to eBay. Though eBay is likely the greatest corporate success story on the Internet, the company is not gravity defying. Sooner or later its earliest markets, the U.S. and Canada, had to mature, and that phase is apparently occurring now. Meanwhile, the slack, such as it is, is being picked-up by eBay's international markets which are showing the same exponential growth that the U.S. market experienced in the past. While older overseas markets such as Canada and the Netherlands are stagnant, China, Hong Kong, India, Italy, France, Korea, New Zealand, Singapore, Spain, Switzerland and Sweden among others, have grow from 53 to 326 percent in the second quarter of 2006. The total international growth was a hefty 55 percent in the second quarter of this year. For several years, eBay has been encouraging its North American sellers to tap into the burgeoning global market, a market that shows no signs of cooling down, and which bodes well for eBay and its sellers, going forward. The Window of Opportunity and Supply & Demand
On auction and fixed-price Internet sites there is always a clock ticking on high prices: supply and demand. Over the past several years, some eBay sellers have successfully migrated to alternative sites, however, good news travels fast. Prices realized have dropped on eBay as the marketplace became glutted with redundant products, and this is likely to occur on Amazon and Yahoo! as more sellers read the successes of others follow suit. Meanwhile, these competing sites have far fewer users than eBay. The high prices realized on Amazon and Yahoo! are bound to level out with time, just as they have on eBay. Further, Amazon works best with niche items such as books and electronics, while eBay moves everything and anything of value. Also, it's difficult to walk away after attaining a good feedback reputation on eBay and start over on Amazon where establishing a good rating is considered complicated, at best, and where the closing fees are hefty. With the exception of those who develop customer bases through their own Web sites using Google text ads, and certain niche item fixed-price sellers, in the long term it's likely that many of today's Amazon and Yahoo! auction sellers will eventually grow disenchanted with these sites as prices drop, and quite possibly migrate back to eBay, because it's hard to match the traffic. Now that eBay seems to have abandoned the concept of propping up the weak-sister Stores at the expense of the auction format, its core business should receive the lion's share of attention in the future, alleviating many of its current ailments. To Whitman: Should I stay or should I go now?
Meg Whitman is quoted as saying no CEO should stay on longer than 10 years (she joined eBay in 1998,) and given her flirtation with the top job at Disney last year, and despite her remonstrations to the contrary, some wonder if she is planning to move on. But then, will it really matter? Are eBay's problems due to poor management or more a natural result of its phenomenal growth? While disgruntled sellers clamor for fresh blood in the boardroom, most analysts don't see a need for management change: "better to have problems fixed by those that know them" is a common refrain. And, Ebay management has had its successes. They have masterfully fended off state regulation on its consignment sellers using the clout of a powerful lobbying apparatus, and Whitman and her team managed to keep the site growing rather than imploding under its own weight. Another success is eBay Motors. Of the time in 2000 when the company was considering branching into vehicle sales, Whitman says, "There is a great deal of difference between a $40 collectible and a $40,000 car there were 100 reasons not to do it." But they did, eBay has sold more than one million vehicles, and eBay Motors continues to do well, gaining 28 percent in listings during the second quarter of 2006. Further, in turning 180 degrees away from their misbegotten plan to prop up the Stores format, they have at least shown flexibility. Perhaps experience, flexibility, and guts are the best recipe in managing a monolithic enterprise like eBay. Regarding her overall eBay experience, Whitman has said in U.S. News and World Report, "Sometimes your are delighted, sometimes you are surprised, sometimes you are horrified what's the worst thing that can happen? You fail." You have to like that sort of attitude, and eBay's prospects for remaining the dominant auction venue for many years to come. Frank Fortunato is a regular contributor to ECommerce-Guide.com.
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