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Not such a Merry Christmas at eBay (EBAY)

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While this is a week when many of us are celebrating and enjoying some much needed time with friends and family, things are not looking so cheerful over at eBay (NASDAQ: EBAY) as slow sales and low traffic are hurting sales on the popular online auction site (subscription required).

This is the first holiday season for the company under its new CEO, John Donahoe, and things are definitely not looking too jolly. According to research firm comScore Inc., the site has been losing a lot of valuable traffic to its competitors, such as Amazon.com (NASDAQ: AMZN) that have more fixed-price products for consumers to purchase, an area where eBay is still lagging.

For the period of November 3 through December 14, a time when many of us were busy spending hours online researching those perfect presents to hand out this holiday, eBay was just not getting the hits that it usually does, and traffic was down by 16% from the same period last year. In contrast, Amazon was enjoying a modest increase in traffic of 6% during the same time frame.


While it is true that eBay has been seeing a large number of users defecting to other popular e-commerce sites such as Amazon, Walmart.com and Sears.com, it is also important to note that eBay is still the king when it comes to e-commerce, and the site is still sitting on three times the volume of its competition. Regardless, the writing is on the wall, and the site is doing all it can to move quickly into the fixed-price marketplace that has been gaining steam over the past couple of years.

It is a tough situation for eBay as it tries to aggressively redefine itself. For a company that has built itself on the back on the auction business, a too rapid and aggressive move into the fixed-price business is definitely going to ruffle a few feathers. The company has to try its best to appease its current sellers while at the same time moving as strongly as it can to keep and regain buyers, all the while trying to entice new shoppers into the site.

Some sellers have voiced disapproval, stating that the company is moving too quickly into the fixed-price business, and that their loyal customers are still more interested in finding the lowest price merchandise available, which is often achieved through the auction side of the business.

What are your thoughts on the current situation? Should eBay look to maintain itself as primarily an online auction house? Or, should it re-invent itself as the largest fixed price e-commerce site online?

Which sites do you typically look to when shopping online? Personally, I hardly ever wander onto the eBay site, for me its the fixed price sites that attract my attention, mainly due to the "fast food" mentality where I like to shop online, find what I want, buy it, and have it shipped to my house... all within an hours time. I can't stand bidding on items, trying to outbid others and waiting on pins and needles to see if I did indeed save that precious $2 on an item instead of just going ahead and buying it online.

What are your thoughts? Let us hear what you think about eBay, and the other e-commerce sites that are out there.

Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.

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Last updated: November 25, 2009: 07:13 AM

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