Thursday, January 24, 2008

2008 - The Year of the 3P Seller!

With fears of recession in the wind and announcements of job cuts coming down the pike, I would look for growth in small business in 2008. As the corporate world becomes less secure, many will strike out on their own in the hopes of controlling their own destiny. Starting off small while still employed and learning the ropes, makes since in this environment. There are currently over 19 million sole proprietors and small businesses in the United States and million more worldwide. This number will increase in a recession and soon, very soon, the marketplaces will be competing for their business. eBay has already signalled that they will, by announcing fee reductions. Play.com charges lower fees than Amazon.com, Etsy.com charge lower fess than eBay. Those marketplace that can achieve critical mass in traffic will be reaching out to 3P sellers more aggressively in the years ahead. Power to the 3People! (Sorry, that sounded better in my head)

Amazon is aggressively courting SMB's (Small and Medium Sized Business) to sell on its platform, expecting to add nearly 40K high value accounts in 2008 and expanding globally. eBay, after years of trying to manipulate seller behavior with their 3 levers (I call them hammers) Price, Policy, Product has changed their tune to offering carrots instead. Sellers, on the eBay platform, whether they realize it or not, are getting back some of the power they gave up over the years. Organizations like PeSA and ECMTA should grow their membership in 2008 as sellers/merchants try to unite behind a common goal; selling their product.

One problem, in this scenario, is that both Amazon and eBay are courting high value SMB's because they drive the largest share of the business. The coming changes to eBay fee structure will change the dynamics of their business as larger sellers get the capability to scale on the eBay platform. Smaller sellers will still have opportunities on eBay but it will probably not be the quaint little "flea market" it has been in the past.

So where does this put the small online merchant or the part-time, extra cash, businesses that swell the ranks of eBay sellers? Increasingly, the moves made by Amazon and eBay will marginalize these sellers. Even though eBay will continue to be an auction business, the focus is shifting and auctions will be less of a focus in the years ahead. There is good news though, even though this may be a short-term negative for small sellers, this change in focus at eBay, will open the doors to other marketplaces like Etsy who can fill the void. Also, entrepreneurs who can harness the power of the small business will reap the benefits going forward.

Etsy, is a fantastic business for hand-crafted products and could easily expand to reach out to those small and part-time eBay sellers that will be affected by the changes on eBay and who cannot sell on Amazon because their category is not offered. Etsy, is growing and will become a force in the next couple of years. Others will follow, though they will be mostly fixed price marketplaces. I think the era of the Auction is over -- it ended when Meg Whitman made the announcement that she would retire.

3P sellers/merchants will soon be in the drivers seat and if they get organized, look out because they will take over the world. (Okay that was a little much, but you get my point).

Just my 5 cents!

6 comments:

Suzanne said...

From a business standpoint: Etsy is holding its own and attracting many crafters. Many sell on both sites.

From a personal standpoint: Etsy has way cooler handmade stuff. Etsy is the place to go for "unique" items.

How many cups of coffee today, Randy? LOL

Randy Smythe said...

Suzanne, where Etsy started their will new marketplaces to come. With Auctions now a footnote in history we can all get to selling product through the whole product cycle as well as unique, collectible and commodity.

Just a 20 oz cup so far. Yesterday was a very interesting day but next week will be even more interesting.

Suzanne said...

Maybe I am missing something, but I heard John D. say something to the effect "auctions are an integral part of the eBay structure, however, we realize that an auction format is not the optimal format for all sellers and buyers. The growth of the fixed price platform is accelerating. Look for changes." I am not hearing that auctions will totally disappear.

Randy Smythe said...

Maybe I will have to update the post. Auctions are not going anywhere but they are going to stop being the focus IMO based on what I heard.

Auctions are still very viable for the collectibles and uncertain value items. I just see eBay fine-tuning the system and naturally auctions will not grow as much.

Does that make sense with what I wrote? If not I will reword it. It all sounded good in my head.

Suzanne said...

Yep, we are on the same page. More focus on fixed price platforms. Thanks for clarifying.

Karen said...

The eBay pricing changes are not lower for all eBay sellers across the board. eBay store sellers will see a net increase, and apparently continue to be treated as second class citizens on eBay - with store items treated differently (mainly not shown) on the basic eBay search feature. By my calculations, I'll be paying 5% more to eBay...and will continue to be required to foist auction items onto my platform in order to show up at all on eBay's search engine...