The only thing saving eBay is no competition
There once was a day when the great eBay commanded respect and considerable power in the world of tech. Since then, the company has been relegated to a mere shadow of its former self that's barely hanging on to a shred of relevance. And the only reason for that is the company's lack of competition.
Let's face it -- eBay is nothing more than an outdated, bloated company that lost its way years ago. And with the news coming off the wire today that suggests eBay is restructuring its worldwide operations and cutting jobs, things don't look too good for this ill-fated firm.
Of course, the company doesn't see it the way I do. Instead, a company spokeswoman claims this news is a "globalization and centralization effort" to ensure it's more prepared to enter the Web 2.0 fray.
But I have some news for eBay -- unless some major changes are instituted, the end may be near.
There's no debating the fact that eBay is still a major force on the Internet. According to the company, it currently adds 6.7 million listings per day and about 60 percent of those originate from Web services that have helped eBay expand its business beyond its own walled garden.
eBay is also a financial powerhouse that has heretofore maintained its standing as an extremely powerful company. According to its latest filings, the company enjoyed a profit of about $348 million in 2007. And while that may seem fine, why is a company that's performing this well, experiencing so many problems?
Sadly, it's because the company's management team is awful and the firm has become a bloated mess that has actually witnessed an $800 million loss in profit since 2006. Some may call it an anomaly (and I'm sure its executives would), but the fact remains the same -- something is wrong with eBay.
Of course, eBay knows this all too well. In it's latest annual shareholder filing, eBay admitted that there are a number of growing risks it will need to confront going forward. Sitting atop that list is its belief that "changing customer demand" is a key contributing factor to the issues the company currently faces.
"We face challenges in the U.S., U.K., and Germany, which are our three largest markets, as growth of listings, active users, and Gross Merchandise Volume on the eBay.com platform in those countries has slowed," the company said in the regulatory filing.
And although eBay's revenue is still expected to grow by about 14 percent this year, the company's once formidable revenue growth of 30 percent to 40 percent has dwindled considerably. On top of that, the company's controversial decision to lower listing fees and increase commissions was met with a significant amount of user unhappiness and its choice to no longer allow sellers to criticize buyers started a firestorm that it has yet to overcome.
At its core, eBay has always been an auction site. In fact, the company made a name for itself because of that single service. But during the last few years, the firm has lost its way and allowed the grow-happy executives to change the way the company is run and perceived.
For example, why did eBay think Skype was such a great acquisition? And what about Shopping.com? How does that pertain to auctions? And although some enjoy using the "Buy it Now" feature, I think it was a foolhardy decision by a group of overzealous executives grasping for a money grab.
eBay is an auction site much like Christies is an auction house. Do you see "Buy it Now" features promoted at the Christies auction? Can people attending the auction make VoIP calls during it? Do they really want buying advice?
eBay has lost its way and the only reason it's able to enjoy these profits is because there's no company out there that's willing to compete on such a grand scale. But why not? eBay is obviously worried about the future and auctions are still a viable way to buy products. If a company came along that finally revolutionized online auctions, the entire landscape of the business could be changed forever and eBay would be long forgotten.
eBay is poised to enter the junk heap of tech if it doesn't do something quickly. It may seem like a company that has longevity written all over it, but trust me, the chances of eBay staying around for too long while maintaining this strategy are slim.
Sadly, it'll only take one competitor.
Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
There used to be other auction sides like Yahoo! Auctions, but sadly those have all died to eBay.
http://dvinedesigns.etsy.com
It is kind of a snowball effect; sellers come to sell on ebay because most people buy from ebay, and with more sellers comes competition and price drops, which brings more potential buyers. A competitor would have a very difficult time stopping that cycle.
The recent price changes affect my business greatly. They will result in the fees I pay going up 40% annually! If I were to achieve the 5% discount eBay is offering a very select few, my fees would go up by approximately 27%. If I were to achieve the 15% discount, my fees would go up by approximately 13%.
I feel that the price increases are extremely misguided. Normally, companies only raise rates when THEIR costs increase, or when they are delivering better results to their customers. In THIS case, eBay's costs have not risen and they are not only NOT delivering better results, but they are actually delivering lesser results (lower sellthrough rates and lower ASPs). Any company that did not perceive themselves as a monopoly would never raise their rates under these circumstances, but, if you feel your customers have nowhere else to go, then you CAN raise their rates, to make up for the lower profits you are having due to the lesser results you are realizing.
eBay has miscalculated in my case. I have to examine how much I pay eBay per year, and what I received in return for that money. I have concluded that I can do far better opening up my own auction on my own site. Unlike many other sellers, I had my own business for 10 years prior to starting on eBay, so I am now reversing the process I started in 2000! At that time, I moved my entire business ONTO eBay, and in 2008, I am moving my entire business OFF of eBay.
I really don't understand why eBay would drastically raise their rates on people like myself, who sell 100% of what they list, and have "fun" true auctions, where all the final prices are set by two or more actual bidders (the very kinds of auctions that made eBay so popular), and I have virtually perfect feedback (only 14 negatives in 300,000 transactions!).
What is equally difficult to understand is that eBay has slashed their rates to media sellers only, who sell very little of what they list, and who have generally mediocre feedback, and who often charge disproportionately high shipping, which eBay says is their number one concern! It also is odd that eBay chose these sellers to be the first recipients of their new "non-level playing field", for I can see no reason to single out these sellers as being especially important to eBay.
But it is not solely an issue of rates that is causing me to leave eBay. I believe their recent changes to feedback will have a disastrous effect on their company. I believe they made those changes because their research showed that buyers do not return to the site (either ever, or as often) because of dissatisfaction over high shipping, and because they get upset when a seller leaves negative feedback on them. So they made their recent changes (primarily trying to force sellers to lower shipping rates, and stop leaving "bad feedback") because they think that will improve sales.
I believe they are completely mistaken. In spite of what their research shows, I believe the number one reason buyers buy less often (or quit the site) is because they were cheated in some fashion. Similarly, I believe the number one reason sellers sell less (or quit selling altogether) is because they are tired of having buyers who never pay.
The solution to both these problems is to verify all other users on the site (both buyers and sellers). When a buyer or seller breaks the rules, eBay could then ban that PERSON, and not just that ID (which has no effect, because the person can get a new ID, under the current rules). If all users are verified, then a bad buyer or seller will be banned, and they can't easily get back on.
I believe eBay is aware of both these problems, but there are two things that prevent them from implementing my solution. One is that verifying all users would mean they would have to admit they would actually have something like 80 million users, instead of the 250 million users they claim (which counts all IDs as separate people, which everybody knows is complete fiction). The other thing is that eBay would have to have a REAL Trust and Safety department which would need to go after bad buyers and sellers, both with police and through the courts, and that would certainly be expensive, and would not bring eBay any additional income in the short term.
Under the current setup, eBay benefits greatly from the problems that beset the site. Many "bad sellers" are among the largest sellers, and pay eBay great amounts of fees. Many "bad buyers" cause items to have to be relisted a second time, and this generates a HUGE amount of revenue for eBay in listing fees they never refund (and surely many people never bother to get a refund of their final value fees, so that is an additional revenue source as well).
To sum up, eBay keeps raising the fees sellers pay, without delivering additional value of any kind, and in fact recent years have seen a deterioration of the value they have provided. They also continually micromanage their sellers, taking control of a greater and greater percentage of their businesses.
Sometime in the middle of April, I will hold my last eBay auction, and I will hold my first auction on my website http://www.emovieposter.com. I am currently in negotiations with other major sellers of collectibles and antiques, trying to help them leave eBay as well, and set up similar auctions on their own sites. I have hope that, at some time in the future, I can help set up an auction site SOLELY for collectibles and antiques, so that all of the smaller sellers on eBay will have a place to sell on that is run by actual sellers, and which truly only does provide a platform for them to sell from. I believe such a site would be very welcomed by almost all sellers of collectibles and antiques.
Bruce Hershenson
President, eMoviePoster.com
Please contact me at ramvictory7@hotmail.com when you plan to help other seller set up their own auction sites. I am a small seller and I totally echo the concerns that have been raised here on ebay.
By the way, I saw your new website emovieposter.com and was very much impressed. would like to know more details about this. Please contact me at the above address. Thanks & Rgds...Ram
Yahoo Auctions closed last June, you silly boy!
Michele
A low monthly fee for unlimited listings.
No listing or FVF.
Feedback is a two-way street.
You can link to your own site.
The first million Founding Members will have the same membership fees for life.
As long as bidding continues, your auction keeps going.
We're growing like wildfire and we're gearing up for a HUGE marketing campaign.
http://www.onlineauction.com/index.php
However there are those of us sellers that depend on the income we make on eBay and until there is a viable competitor we must stay.
For any sellers staying may I suggest checking out a site I found to help overcome the Feedback changes -
www.AFTERTHEGAVEL.com
They are providing a free service for all online sellers to be able to alert other sellers via Neutral & Negative feedback of bad buyers.
For me I must stay on eBay and this and anything else I can find to keep the changes from being as severe are my new best friends.
EBay will chopped at one site at a time, THE TIME IS RIGHT for eBay to be put in it's place.
There is no room for a monopoly that DOES NOT listen to it's sellers.
Donahoe is only good for punishing sellers and coming up with stupid ideas, WAY OVERPAID!
i look forward to what you will write come may.
best regards,
greta
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Evacuate by May 1, 2008!
Online Auction is theup and coming auction house which will be even better than ebay!! They are people who know what it's all about and understand what it's like to be both a seller and a buyer...
Time and patience is what it will take and with the persistence of the founding members, I believe that e-commerce will be amazed as this company grows and flourishes...
Ebay's leaders are just a bunch of text book yuppies looking to make a buck off of other's labors. I'm not at all impressed with them... In a couple of years they will be like an old pair of tennis shoes that one must part with and throw away... Just a memory...
- by kingkyzr333 March 21, 2008 11:23 AM PDT
- Yes, this article does seem to be prejudice against eBay. Buy it now feature is great for those that want to um... how do you say....uh......."buy it now" and not wait an extra 4 days for the auction to end for case of $10 LightScribe dvds-rw's. Keep in mind that just because a company begins or gains success with one way of doing things does not mean that it is exempt from evolving or adapting to customers or users demands. eBay sells many common staples that are needed for offices or home and every merchant has a very good idea of what these products are worth. Why not, set a but it now price 2 or 3% higher for those that need it NOW and are willing to pay the extra change for the convenience. In fact, MOST merchants offer buy it now & auction listings for the exact same products. You criticize eBay for being bloated and outdated but then you criticize them for adding or developing newer features like buy it now or Skype chat for talking to merchants.
- Like this Reply to this comment
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Showing 1 of 2 pages (45 Comments)Now, I do agree that they WAY overpaid for Skype by about 2 billion, but I also think it was an investment risk with possible untapped potential. I wouldn't claim Skype as an airweight just yet.
To reiterate what PortVista left, about the design and layout. They are completely right, many folks did, need to buy eBay for dummies books and spend many hours learning to understand how to use eBay and many of them still don't use it because they still find it too confusing.... even younger generations. Besides, the design is good. It simple, it's effective, it's easy, what about it needs overhauling????? I think what you will begin to see more of, are higher resolution photos and HD videos displaying products. This is just bettering what is already there, that's progress, for a company the size of eBay that relies solely on their website for success; 95% of the time that works better than just redoing everything.
What about Paypal? How often do you see Paypal next to Visa, Mastercard & Discover as forms of payments accepted? Even if eBay takes a dump, Paypal is still wildly successful and can most likely survive on it's own, kinda how Google checkout does.
By the way, I have bought over 30 products directly from China through eBay. 10 years ago when I was 14, could I have done that? Some of you out there with kids around 15 or so. Ask them if they know how to buy something directly from China or anywhere else overseas.
I say this because, everyone knows China is a treasure chest full of endless and almost free manpower. America and other 1st world countries were and are able to exploit this by becoming a fat middleman; I buy for .02 over there, I sell for 5.00 over here and only have to do the easy stuff (sell, not even make the products). I enjoy operating margins of 60% they operate off of margins of 2%. That's fine, it's the way of the world, but, what happens when you cut out the middleman. Middleman has to get a REAL job with REAL labor and REAL work breaking Real sweats.
My point is eBay has the power to channel rich consumers, over here and elsewhere with very poor laborers with an endless array of products and junk that we think we need because we are so comfortable with our lives. But those laborers soon realize what those products sell for. NOW they still directly to us for 2.50 instead of 5.00 and they get paid 2.48 instead of .02 and they tell the middleman to get a real job. This is also they way of the world.
So to the writer of this article ******** about the lack of eBays globalization efforts. That cushy, article writing job with C-net may not be available once America needs to stop buying and start selling like the other 95% of the world. You may be fine with that, I am, I don't mind working hard. I do mind lazy ***** that get paid more than they should, because of temporary holes in the system. I think we all do.
for those of you trying to judge me through my article I will list a few facts about myself. I like to stereotype as well.
24/male/white, no kids. 6'1", 200 lbs.
Moderate Republican (supported Mitt Romney)
3 years, 2 different community colleges.
have extreme fascination with electronics
Atheist.
I am in the health/life insurance full time but also do many odd jobs on the side to make extra cash and as a hobby.
Was not adopted and and parents are not divorced.