Do you like auctions? Personally, I don't. Sure, the stock market is essentially an auction, but it's an auction without a lot of noise (at least on my end). Anyway, this brings me to a BusinessWeek piece on eBay (NASDAQ: EBAY) and its evolution. It looks like auctions are no more fit to survive than the dinosaurs were. Research overwhelmingly shows that users of the most famous online auction destination in the world would rather pay a fixed price for an item than haggle over it like a frantic trader at a busy bazaar.
Now, as one commenter made clear in the article, this changes the essential gene structure of eBay's DNA. But is mutation necessarily bad in this case? Not to my way of thinking. To be honest, I haven't done any eBaying directly; I usually use a friend to acquire an item for me if I'm looking for something. Not only am I too lazy to open an account, but I dread having to play the auction game. Why put up with such nuisance? When I want to buy something, I don't want to compete and see values change. Think about it: when you go to Wal-Mart (NYSE: WMT), do you want to barter over a bar of soap?
Okay, so we're not talking about bars of soap. We're talking about items that, to be fair, do lend themselves to the auction motif. Comic books, autographed photos, rare recordings, and so forth, are definitely fair game for the electronic gavel. Still, it's annoying. Wouldn't you rather know that a rare copy of The Texas Chainsaw Massacre for the Atari 2600 is $200, take it or leave it, and that you didn't need to get down in the pits to start bidding for it?
Maybe I'm exaggerating the kind of frustration that can be encountered on eBay. But it seems like management is willing to bet on a future sans auctions. Actually, it's not so much that they're willing to make a bet on this thesis on their own volition; simply put, the numbers are compelling. People want more of an Amazon (NASDAQ: AMZN) type of experience. They want to simply click, buy, and wait for the item to arrive on their doorstep.
Personally, I think this kind of paradigm shift stands a great chance of being a net positive for eBay. Yes, many sellers will flee; others, however, will take their place. Besides, I've oftentimes noticed that many auctions never have much bid history to them; that isn't an observation based on any scientific collection, but nevertheless, it is one of the reasons why I would support management in reducing exposure to auctions. Shareholders actually should want to see management focus more on the fee structures in place, as many sellers believe there is an inequity when it comes to them.
That's the larger opportunity, and the more important one. Auctions will always remain applicable for many items on eBay (imagine how traders would feel if they didn't have eBay to auction off the next PlayStation iteration!), but if they only comprise a small percentage of revenues, it won't make a difference so long as fixed-price selling becomes the norm.
Disclosure: I don't own shares of any company mentioned here; positions can change at any time.



Reader Comments (Page 1 of 1)
6-03-2008 @ 4:34PM
jrhaight said...
If I want to buy something outright I would go to a retailer or amazon. If I want to find something rare or limited availability, I used to go to ebay. Not anymore,I go to Ola.com or full name onlineauction.com where they still have real auctions.
6-03-2008 @ 4:47PM
pagebypage said...
Until recently I had been an ebayer for the last ten years with little to no problems. Within the last couple of years though, it seems like there have been few auctions without problems...i,e; tardy shipping, shipping overcharges, bogus listings. I got screwed on my last three purchases in a row and have now cancelled my account because ebay customer service refused to take any action at all against the sellers. One even later informed me (after I disputed the item to Paypal 30 days later) that she not only never shipped the item, but that she had no record of even having it in the first place!!! She then told me that ebay had never even contacted her about it despite several complaints made directly to them concerning it. They basically laughed at me like it was all a big joke. Thank God Paypal was willing to make it right. Personally I wish ebay a long, painful death......
6-03-2008 @ 5:03PM
Vic Mackey said...
If you have never done any eBaying, how can you even comment?
6-03-2008 @ 8:00PM
KD said...
It's true, to understand what ebay's success used to be, you needed to be a seller and or buyer interacting on the site. ebay was unique unto itself. The new management ruined this identity and turned ebay into a commonplace selling site. They really should change ebay's name now. It's only a giant conglomerate that will be slumming it's way through the online store universe and has no special place in anyone's heart anymore. There will never be another site like ebay was again
6-03-2008 @ 9:41PM
Bobby said...
I agree, if you are not even buyers or sellers on ebay. How could you comment?? You are not a part of a community. I both buy and sell on ebay. As a buyer, I love the new policy, I can screw sellers easily, if I want to. As a sellers, you will get a hit sooner or later. Is ebay want to be like amazon? Then carry your own merchandises, pay the shipping, sell your product cheap, offer a free shipping, may be ebay could afford to do that because ebay don't pay ebay fee. Ebay is unique, but wants to be generic?? I used to hold ebay's stock but I don't believe the new structure and policy. So, I sold them all.
6-04-2008 @ 5:14PM
Lucinda said...
Love it when someone writes an article about something which they admit not knowing anything about. I've been a buyer and a seller on eBay for years, with a positive rating nearing 20,000. And I'm finding the changes are not making radical differences. Some items work well at fixed prices, but others, especially one-of-a-kinds, need the auction format. eBay allows this flexibility. If a reporter would just once use eBay enough to know what it's all about, they might actually write a meaningful article -- instead of just trying to stir up trouble.
6-05-2008 @ 7:11PM
JW said...
Auctions for many are as exciting as a slot machine, but more profitable. They are way for sellers to insure liquidation of outgrown items and is an essential part of our economy... BUT there are inherent risks in the current eBay model, from forcing Paypal on its sellers and banning Western Union, to now having a damaging buyer-speaks-only "feedback" system. Their customer support system is inadequate to handle the flood of complaints. These business practices leave even the veteran sellers with severe vulnerability to unscrupulous buyers. Without better member identification and a fair "transaction rating system", eBay with its high fee structure will languish amid competition and caution.
6-06-2008 @ 5:16AM
Misty said...
With all due respect you have no understanding of what you are talking about and even so much as admit that you don't.
Auctions have been around for many moons and will continue to be for many, many, many more, those at the helm telling you they are a dying fad also know nothing about auctions or the service auctions provide.
If I want something common that can be purchased locally I will go to Walmart or where ever to purchase the item locally where they also honor competitor sale prices if you provide the ad of the competitor.
Auctions provide a service for items that are no longer manufactured and can no longer be purchased such as antiques and collectibles this is why eBay had thrived and grew in the past as it did, it brought all the collectors together in one place to find those hard to find one of a kind items and collectors will continue hunting auctions for these items.
Antiques and collectibles are always changing in value so you can not put a fixed price on them it just don't work that way.
What has caused the slow down at eBay is the poor customer service eBay provides and the ever changing policy's and deceptions as well as the attempt to micro manage all the businesses listing on their venue, plus all the scams and fraud that eBay keeps trying to sweep under the rug because it makes them more money not to acknowledge the problem, or the lack of verification of buyers and enforcing of their own policy and the contract to purchase a buyer commits to when placing a bid.
eBay was and is just a venue they do not hold ownership to the items being listed for sale on their venue, they have no right telling sellers how much shipping of an item will be the USPS controls that cost not eBay or sellers.
There is so very much more taking place inside of eBay that you know nothing about so unless you are willing to investigate and understand what is happening you have no place or right to report on this matter what so ever.
6-06-2008 @ 11:33AM
gumbo koontz said...
Ebay is fine but I am nervous about selling my stuff with my home address as return address. I sent feedback to Ebay urging them to give me a bar code type return address for buyer to slap on if they want to return. Ebay can work it out with our postal service . Many Ebay sellers use business addresses, so what? but I am concerned about home based sellers using own home addresses .
6-06-2008 @ 11:34AM
gumbo koontz said...
I have stuff to sell but I am sitting on fence waiting for Ebay to smarten up and start issuing secure bar coded return addresses to any seller who request for one.
6-06-2008 @ 11:36AM
gumbo koontz said...
Ebay is a great company destined to do a trillion dollar worth of auctions annually in 10 years.. Ebay is an international company already.... If you want to invest overseas... do it at Ebay stock....selling for $30 a share now..
6-06-2008 @ 11:37AM
gumbo koontz said...
Ebay sure beat garage sales...
6-26-2008 @ 10:31AM
BrokenBay said...
As other comments suggest, the author of this article would have benefited from greater first hand experience of using eBay as a buyer and seller before writing IMO.
While many will agree that waiting around for an auction to finish on a basic consumable product is silly, eBay attracted it's passionate followers because of the less common and more eclectic, collectable items the smaller and more specialist sellers would offer. These smaller, more specialist sellers were also avid buyers on the site.
The current management doesn't see this and believes we all want to buy ink cartridges for our printers on the platform. We don't. The managements projections are now flawed IMO because those people who cannot trade their collectibles on the platform certainly wont hang around to pay uncompetitive Buy.com prices, particularly when the shipping costs are higher on eBay than on the Buy.com website direct!
The new management is woefully out of touch with the mindset of their users and the recent eBay Live event in Chicago was a great barometer for investors to judge the real impact CEO John Donahoe's flawed vision is having, see http://www.pheebay.com/?ebay-live-2008-a-poorly-attended-and-bitter-event-397.html for a down to earth summary of what I mean.
6-30-2008 @ 4:28PM
Kate said...
I've had an eBay store for 6 years and working with eBay is very frustrating. eBay has removed the rating system so sellers cannot rate buyers. If I encounter one underserved rating, I will close up shop and leave for good. There are some horrible customers out there that if you don't do what they want, will leave negative feed back for revenge. At least when sellers could leave feed back, you had leverage with the bad buyer. Now that negative rating will stick. Add to that the high cost of transaction fees and the lack of customer service by eBay and eventually eBay will bite the dust. If you want your customers to be loyal, you have to be loyal to your customers, and not rip them off with excessive fees. eBays overseas investments met with negative profits and that's why transactions fees went through the roof in the US. I wish eBay would allow buyers/sellers to rate their service! Talk about negative ratings! They'd have to shut themselves down.