EBay's changing auction strategy
Posted
Jun 03 2008, 12:56 PM
by
Kim Peterson
Rating:
Auctions are disappearing on eBay and being replaced by fixed-price item sales. BusinessWeek says that's due to the changing needs of the consumer, who thinks bidding is too much hassle. Nope. Don't blame the bidder. EBay is doing everything it can to choke the life out of its own auction business -- and that's a big gamble.
Yes, time is precious. And yes, there are people who would rather "buy it now" on eBay at a higher price than spend days in a prolonged bidding war. About 42% of eBay auctions have a "buy it now" option, a figure that has grown 22% in the last year, according to BusinessWeek. EBay shares are up nearly 1% today to $29.59.
There's no question that fixed-price auctions work. But eBay is sacrificing its core auction business to fuel fixed-price transactions. It implemented fee changes this year that favor sellers with fixed prices and who sell more expensive goods. The sellers that helped make eBay what it is today -- the ones getting rid of baby clothes or old records -- are being pushed to the fringe. Add to this a new rule that limits the feedback sellers can give buyers, and it's no wonder they're abandoning eBay for Craigslist or other alternatives.
One seller told BusinessWeek he decided to leave eBay after realizing his annual fees would go to $180,000 from $120,000. He's going to start selling on his own Web site. He may not get eBay's traffic levels there, but he won't be paying eBay-caliber fees either.
So where does this leave eBay? It clearly wants to be more of an Amazon-style retailer, with more dependable transaction revenue rather than relying on wild-card auctions. It expects to increase global listings that way, and said that its listings improved after implementing the pricing changes. It's paying a lot of attention these days to its PayPal unit, which is seeing great traction as a payment option on numerous Web sites. (PayPal brought in $582 million in Q1 revenue, a 32% increase year-over-year).
The traditional auction business is becoming an afterthought at the company, and honestly, who can blame eBay for trying to move beyond its roots? Its share price has tanked since the end of 2005, and a new strategy was in order. So yeah, things are changing at eBay. But don't blame buyers who are short on time and patience. EBay is doing this all on its own, and deserves total credit for whatever success or failure lies in its future.
Related reading:
Did the eBay boycott work?
Ebay nails Q1, but questions remain
Why eBay offers cheap long-distance calling
Ebay CEO to step down
Ebay tries to wash away mistakes with new service
