Wednesday, February 06, 2008

Death by a Thousand Cuts

The impending death of eBay, as the King of all marketplaces, has been rumored for years. Every time management makes a change, raises fees, or adds sponsored links, sellers say they will walk.

I've been following eBay since 1999 and I've seen and heard it all. Still eBay continues to be the 800 Lb. Gorilla of ecommerce. So it didn't surprise me when eBay sellers were once again on the warpath. Granted, this time the unrest seems less about fees and more about the changes to feedback; the perception is that eBay is taking away the ability for sellers to protect their business. In fact, during a conference call yesterday between PeSA members and eBay management, I did not hear one question concerning fees, instead I heard about DSRs and Feedback.

Sellers are upset for many reasons, but in my view, many of them are concerned that they are losing control of their businesses. I believe if sales were great, they certainly wouldn't be complaining (Amazon exerts much more control over their sellers, but they don’t complain as much because they are selling a lot of product). Profitable sales are hard to come by on eBay and sellers are fighting very hard to maintain control of their business. The feedback issue is just a symptom of the feeling of helplessness. By not allowing a seller to leave a negative rating for a buyer, sellers believe the buyers will hold them hostage. This may not mean anything to those outside of the eBay ecosystem, but to eBay sellers Feedback is their reputation and you don't mess with their reputation without a fight.

So, once again, sellers are upset and threatening to strike. I've never felt that a seller strike would be very beneficial; especially a one-week strike. The one difference I see with the seller unrest is, its not just limited to one segment of sellers. In Aug of 2006, eBay raised fees on Store sellers but left Auction sellers alone. Earlier fee increases have affected one group more than another, but this time eBay has messed with Feedback, the most sacred aspect of eBay and it affects every seller.

So what does all of this have to do with “Death by a Thousand Cuts”? February of 2008 is much different than August of 2006. In 2006 the options for eBay sellers were limited to Amazon and a few small upstarts. Amazon was just starting to expand their categories and open them up to 3P sellers, so there were not very many places to go. Today is much different; Amazon has expanded their 3P offerings, adding WebStore and FBA in addition to opening up more categories. Those upstart companies, that were around in 2006, have grown steadily and are much more viable this time around and paid search isn't so scary to sellers any more. Heck, they can even buy paid search ads on eBay that gives them more exposure than eBay store listings.

I came across a great article at entitled EBay rivals circle vulnerable auctions kingpin about the many options available to eBay sellers today. What was interesting were the numbers and trends these sites are seeing. Many of these sites saw an increase in registrations around the time of the eBay announcements. Sure most of these sites are not seeing huge numbers in real terms, but the combination of the number of available sites and the measurable increases in registrations for each, begins to add up. Blood is in the water and each of these sites is stepping up their efforts to reach out to the unhappy eBay seller. “Death by a thousand cuts”, just means that not any one cut is fatal. In fact it may take a thousand cuts to finish off the victim and all the while the victim doesn't feel they are in danger, until it is too late.

Lets start to counts the cuts: (Most Data is from the article)
  •, based in Grants Pass, Ore., reports that roughly 7,500 new sellers have opened accounts since eBay announced its new policies last week. That's a 15% jump in the site's user base, within a matter of days.”
  • “Another contender, eCrater, has registered 1,400 new sellers within the last few days. That's more than double the site's average weekly total.”
  • “Another upstart attracting attention from fleeing eBayers, San Francisco's iOffer, is built around a focus on friendly engagement between buyers and sellers. Sellers can transfer their eBay feedback scores to iOffer. . . iOffer has accumulated 75,000 sellers and nearly 1 million total users since its 2002 launch.”
  • Another auction site, Chicago-based uBid, targets bulk sellers liquidating excess inventory. Its 7,000 participants include Sony (SNE), Motorola (MOT, Fortune 500) and Dell (DELL, Fortune 500). All sellers submit to a 10-point financial exam to ensure they're qualified to do business on the site: "That's part of our stringent anti-fraud stance," said uBid CEO Jeff Hoffman.”
  • “… the auction site Bidville, which uBid purchased in 2006, does focus on what Hoffman calls "consumer-to-consumer" sales - the market eBay now dominates. More than 350,000 sellers are registered on Bidville, but 25,000 active accounts provide most of the site's 1 million listings, Hoffman said. “
  • “Following eBay's announcement last week, the Overstock (OSTK) team worked through the weekend to design a new strategy highlighting its lesser-known auctions space, said Overstock CEO Patrick Byrne.

    The result? Overstock, in Salt Lake City, will redesign the header on its homepage to direct more traffic to its auctions tab. It plans to accelerate a software rollout that will beef up its auctions community message boards - and it's laying plans to produce 15-second Internet commercials to get the word out.

    "We think the time is right to position ourselves in this category," Byrne said. “
  • “Even Amazon has noticed an uptick in new seller accounts in the last week. Best known in its early days as an online bookstore, Amazon (AMZN, Fortune 500) expanded into consumer electronics and other categories, and in 2000 began allowing third-party sellers to list their wares alongside Amazon's offerings. All products are offered at a fixed price.

    Today, 26% of all items sold on Amazon come from its 1.3 million third-party sellers, who range from mom-and-pop vendors to Target Corp (TGT, Fortune 500).”
  • And the cuts go on: Yahoo Stores, Independant WebStore platforms,,,, Google Product Search, Google and Yahoo paid search and BuyBack sites are going after consumers who may become casual sellers.

Not one of these cuts will be fatal, but when you add them up they are beginning to drain the lifeblood of eBay; the seller.

I'm not predicting the imminent demise of eBay, but if they don't do something quickly, to stop the bleeding, they may find themselves as just another marketplace and my guess is, that 800lb. gorilla is going to weigh a lot less.

Update: CNN/Money did a follow-up with 5 profiles of former eBay sellers and where they are selling now. Most of the profiles are small sellers and one is BargainLand a large liquidator that left eBay this summer.

Just my 5 cents!


Anonymous said...

No matter what changes occur at eBay, people are gonna grumble. Some with leave, others will roll with the changes, and still others will come to try their hand at it.

We've been selling on eBay for a little over 5 years. We sell in the Building and Hardware category and offer products that range in price from $50-$750. We have an eBay store with about 2500 items, are a pro merchant at Amazon (currently offering about 150 items), and have a website.

eBay has been fantastic for us and continues to be. Traffic continues to go up. Total sales continue to go up - about 22% y-y. This year is up more than double that. However not all customers purchase there though. About 50% of sales see us on eBay and call our 800 number to place their order.

We've been at Amazon for about 8 months and have only made 1 sale. Our traffic is pitiful - maybe 5-10 visits a day. I'm not so sure that people are looking on Amazon for our products just yet. I believe in time they will and the cost to be there is minimal. We're continuing to add our inventory there, and at different price points. I'm sure that one of the main reasons we don't see more Amazon sales is that we don't have any feedback yet.

We have over 900 at 100% positive on eBay (over 1200 total). We offer top notch customer service, but probably only about 30% leave feedback. I'm not hung up on the feedback changes. Like most everyone else, we don't qualify for the 15% FVF discount. Ours is 4.7. I'm not going to sweat it. We'll just try to sell more product.

We'll just continue to diversify more product to other marketplaces while adding more to our eBay store. As long as our traffic continues to go up and sales go up, we'll be happy.

It's a tough call as time is limited to create listings and we get such a good return from our eBay store. I remain optimistic that our Amazon business will pick up.

Anyway, that's our experience. That's for continuing to share your views.

EGNATZ1 said...

I agree with you completly Randy.
I really think Ebay has made some major mistakes and need to make up their mind on what they want to be.

When stores were put in search and removed they said they wanted to be an auction site and that was the magic of Ebay.

Now they want to push fixed price and be Amazon.

Instead of looking at their strengths and focusing on them they act like their bipolar and do one thing for six months and then say well that didn't work lets try this.

When they change their business model every 6 to 12 months it just puts pressure on sellers like me to change mine and its getting old.

Billoment said...


I saw the article also and filed. Great info on the other venues out there.
I have been on eBay since '99 also mainly to bring in some extra cash because of typical corporate layoffs that have plagued me in my later years. A couple of years ago I started doing this as a full-time part-time business on the erging of my new wife. It now is becoming almost a full-time gig.
eBay has been good and sales are booming. I am going to stay for now but as soon as this is starting to eat into our profits our eBay Store will be gone. Our web site is picking up and we will soon expand into other areas. I still have an old account at Amazon and have started ones on other places. The on-line market is for ever growing. We also have tens of thousands of email of customers addresses for marketing that we have picked up through the years from eBay and other venues.
Our plan all along was to eventually just use eBay as more or less a paid search and to lead them to our web site. It appears that we will possibly be moving our plans along a lot sooner than we thought. It looks like the 800lb. Gorilla is turning into an 80lb. Chimp.


Randy Smythe said...

Guys/Gals, thanks for your comments.

eBay is stil a viable marketplace for many sellers. But I fear is becoming just another marketplace rather than the leader.

Bill's story is pretty similar to many sellers and certainly, as we face the possibility of recession, may be the story of numerous new seller, but I think eBay maybe losing their leadership in this area.

Anonymous, I'm very glad to hear you are doing well on eBay and certainly Amazon is not the be all and end all option. Some items don't sell well there but my gues is that sometime in the future they may.

EGNATZ1, you make some very valid points. I especially like this observation:

"Instead of looking at their strengths and focusing on them they act like their bipolar and do one thing for six months and then say well that didn't work lets try this.

When they change their business model every 6 to 12 months it just puts pressure on sellers like me to change mine and its getting old."

egnatz1 said...

Randy I really liked a suggestion you made a while back about splitting Ebay into two seperate sites.
Classic for auctions and collectibles and the like and a new site for fixed price and commodity type items.

I sell postcards and collectible paper and auctions still work great for those type of items if they are seen.

If you check some of the online collectible auction sites such as Hakes and others you will see they are getting record prices for collectibles.

Ebay could have the best of both worlds if they were a little more forward thinking and realize what is best for commodities such as media is completely wrong for collectibles.

You can't make one model work for the other.


Randy Smythe said...

Dave, I have personally pitched a similar idea dealing with store to a Vice President at eBay and was told that they understood the needs but (the reast is my interpretation) the process is very complicated.

eBay is a public company that must answer to its shareholders and so they mange the bottom line with gusto. The resources required to make that change are greater than their expected ROI is my guess. Instead they are working to be the first site to make Fixed price and Auctions co-exist in the same search. If they are right more power to them, in the meantime sellers will be checking out other sites.

Stefan said...

Ebay is never going to be like Amazon for one main reason: Their entire setup is wrong. Amazon's ASIN system allows multiple sellers to sell on one UPC...

It is too late in eBay's life to create a similar system, so they are stuck with their current system, (where, for example, you type in "Xbox controller" and literally ten thousand Xbox controllers show up). Best match will help that but it will never be perfect. It is an inherently flawed system in that respect.

The problem is, because of this design there is probably no way then can ever go to a zero-listing fee/high FVF system, the site would be beyond flooded, to a point I cannot even fathom.

As supply increases, (and especially with demand slowing) I see eBay's distant future as little more than an outlet for super cheap and liquidated merchandise purchased for pennies on the dollar.

And although I personally feel that the people at the top of eBay are a bunch of monkeys, it won't be their fault either. The entire setup is just wrong.

Randy Smythe said...

Stefan, they keep trying half-measures. If the cost to expand looks to be too much to maintian their high profit levels they don't invest in the technology and apply those resources to other projects.

They run with a staff slightly larger than the one that runs My Blog Utopia. Then they rotate people in and out to deal with issues. could have been a real competitior to in the early days but management frittered it away. They did the same thing with Express.

Had they just invested some resources into it they would have been able to grow it. Instead all Express growth is organic (slow) thought it grew very fast in the beginning. I've heard that it did over $100 miilion in GMV in its first year. If I had created a website that did $100,000 in sales in the first year I would be considered the next Zuckerberg, but when eBay does it its just gets a shrug.

The problem with eBay's model is when you spread that $100 million over 1 million sellers that's $100 in GMV per seller. This is why sellers think it was a failure.

Somebody at eBay has to take responsibility for the problems they are having. But as you said, adding layers of complexity to the existing structure will be a failure. They need to blow it up and start over again. Fat chance of that happening.

Randy Smythe said...


Gary over at Auction Rebel has checked out at least one of the sites I mention in the post above. He did not think too highly of it.

I have not checked any of these sites out other than the obvious big guys so make sure to check them out yourselves. The point of the post was not to suggest options but to explain the environment surrounding eBay today.

If you are looking for another Auction website you are probably already on the best one. (eBay)

Vista said...

Interesting, I have always thought that one of eBay's problems lies in the fact that they are committed, I mean COMMITTED to the auction thing. And I can understand why to a point - they think that auctions should always be the heart of what eBay is all about. But the realities of ecommerce & the rest of the world caught up with them and now I just do not see their current listing/pricing/lack of a standard listing structure as being able to handle it forever.

Amazon on the other hand, has done nearly everything the right way from the beginning. Unlike eBay management, (who I am convinced have absolutely no idea what they are doing sometimes), Amazon hasn't strayed much from their success formula, and for good reason. The people at the top of that organization are some of the smartest e-commerce players in the country. 10 years from now my gut tells me that Amazon will remain a viable place to buy, sell, and learn. Can anyone out there REALLY say they feel the same way about eBay?

I don't think eBay is going to topple anytime soon, I don't think maybe people do. But 2008 is going to be one of their worst years ever. The US recession, combined with the ever-increasing cost of oil, rising fees without rising traffic, and buyer frustration are the causes. It isn't going to blow up right away, but I think we all know that it's future is definitely not pretty... And web historians will know exactly why.

Tony P. said...

Randy, you're prolly correct about what effect the upcoming 'strike' will have - the Big Boys will continue to list, which will keep the numbers up. But watch those numbers and if they should fall by a few million, ebay may well have skrood-the-pooch this time around.

One of their former actions against a particular segment of sellers actually resulted in them reversing themselves. Only the sellers that were directly affected know the real story. I am one of those sellers. Back in 2004 ebay rolled-up all of the sub-categories in the Pottery & Glass Category and unleashed Item Specifics. Overnight, all 313K items were dumped into the Other category, under the P&G main category. It was a mess.

You may have heard about this, it is known as the P&G Fiasco. Many ebay sellers that have heard of it aren't all that impressed by the claims of sellers that we made ebay 'blink' - some are even *tired* of hearing about it. But I was there on the P&G Cat discussion board every day for about a month and I watched ebay weaken, a little more each day. It began within the first week - sellers ended their auctions and the listing count dropped from that 313K items, to less than 100K items. BOOM baby.

In the big scheme of things, a drop of 200K is nothing, although it does demonstrate a certain determination, but that isn't what made ebay reverse their action. We told them that we had no incentive to put all of our listings into ONE category, where buyers wouldn't know to look for them by way of Item Specifcs. The buyers were used to browsing through categories and would be Clueless. Therefore, we were NOT pissing away our time or money. Period.

Randy, can you understand that? Of course you can. You can also see how ebay had set themselves up *Perfectly*, for a self-created strike. They hadn't thought it through. Re-read that last sentence several times because it hides a number of factors that they failed to understand or even to be aware. People raiding Granny's attic for goodies is one thing; they prolly don't even keep track of their listings, let alone care what they get for them.

BUT, the sellers of collectible Glass and Pottery are a different breed. We have loads of professional sellers - SERIOUS sellers of $5000 porcelain pieces, $2000 glassware, etc. We would not be denied. And we would not list ever again and that's what we told them. They explained how great their new system is/was, but we didn't give a chit. By the time that THEY finally understood our resolve, the item count was around 78K. They brought back the sub-categories after approx 6 weeks.

That little diddy taught me something about them; they are very stupid when it comes to human nature. And, they have very little Common Sense in regards to their sellers' businesses. This latest fiasco reinforces those beliefs. Maybe they need another lesson.

Doug Feiring said...

Sure these alternative sites have seen an increase in sellers, but have they seen an increase in bidders? The sellers have to go where the buyers are. eBay has the sellers. Until that changes (and it might be changing with Amazon back in the game), the sellers are gonna keep coming back to eBay. They always have.


Randy Smythe said...

Doug, the small sellers may leave and then come back. Many small sellers can't manage multi-channel selling.

The larger sellers are much more pragmatic. They will sell on eBay as long as it makes sense. Many of them need a liquidation channel and eBay may end up being that for them.