Tuesday, May 06, 2008

Winners and Losers in the Buy.com / eBay Partnership

I said I wasn't going to become the eBay/Buy Blog, but it's the story of the day for eBay sellers so I'll keep posting.

It is still very early in this new arrangement, but I can start to see which segments of the eBay ecosystem are going to benefit and which are going to have trouble.

In Trouble:

  • Current eBay Sellers of New in-season product. This was already a tough business on eBay and it just got tougher. Sure, the sellers who get surplus deals on "New" in-season product will have their opportunities, but the majority of sellers who did business like I did (bought from distributors) at least in the Media category, Consumer Electronics and Computers will have to re-think their business ... again.

    With all of this new in-season product, eBay will be similar to Amazon. Amazon is the 800 lb. gorilla and sells the lion's share of the product but 3P sellers can still stake a claim there. Buy.com will maybe be a 200 lb gorilla, but still formidable. The key for these types of sellers is to do their homework and understand what they are up against. Being nimble has its advantages. Those who don't adapt will be out of business.
  • The Level Playing Field - It's gone and will never be coming back. In fact this will be the last time I bring it up.

    Big retailers, with clout, will be able to negotiate great deals with eBay management. All of the old rules that protected the marketplace like no emailing customers, checkout re-direct, High Core Fees, and DSRs and Feedback (just rumors) won't apply to these new deals.

    These new Anchor Stores will instantly command category share. In fact, Buy.com is already taking share from existing sellers in several categories. It isn't growing eBay's GMV it is just redistributing it. Here's the problem Buy.com may do $2 million in sales this month but it wasn't $2 million in new business, they just took share from each seller in the category.
  • eBay - If this little experiment doesn't work, how are they going to be able to convince other large retailers to take part and what kind of concessions will they need to make to all the existing sellers that they have pissed off.

    The Third Party Seller business is now becoming very competitive and the success of Amazon's model; where a retailer opens up their platform to 3P sellers will be the wave of the future. Imagine BestBuy doing that; or Zappos; or any other large retailer. If eBay fails at this "New" approach they will be marginalized, IMO.

Going to Benefit:

  • Used, Surplus, out-of-season, end-of-life product. With a major retailer taking the lion's share of the new-in-season business and its share of the "new" long-tail business. eBay buyers are still going to be looking for a deal.

    I am doing very well with used product on Amazon and at much great margins than I ever achieved on eBay. The same thing will happen on eBay and when a new retailer heads into your category if you fill the void for used, surplus, out-of-season and end-of-life product you will do okay and might even thrive.
  • Collectibles and Vintage Sellers, may benefit if this move actually re-engages inactive users, more activity on the site should benefit these categories and eBay is still the best place on the web to find this type of product. The only caveats with this, is eBay needs to abandon "Best Match" in these categories, which is not likely.
  • Consumers - In theory this deal and the similar deals coming down the pike will benefit the eBay buyer. It's all about the "Buyer Experience". Now, they can truly find IT on eBay. The one problem with this, is if eBay buyers say; "I can get that new in-season product elsewhere, why would I shop on eBay for it." My guess is eBay has the metrics to show what people are searching for on eBay and they've targeted that type of product for future deals.

There are other winners and losers and this is an All-In bet by eBay. If they pull it off and the inactive eBay buyer re-engages, then this will be a success, even though many small business will fail or have to re-organize. If the in-active eBay buyer just shrugs and says "Big Whoop!" then eBay is in big trouble.

Just my 12%


Dave White said...

I am so happy you have uttered the last word on "level playing field"! That theory has been long abandoned by eBay and as you said will never return.

I do disagree with your take on used, collectible and vintage item sellers. I don't feel that buyers in these markets will be re-engaged by the retail new item experience. As eBay competes with Amazon, their focus will be on retail and not the used, antique, collectible market. Sellers in these categories will find sites that draw buyers of this specific type of item. Buyers of collectibles and antiques and used items do not want to wade through all the new retail items to find what they are looking for.

Back in the day when I was searching flea markets (yeah I know that is a dirty 4 letter word to JD) for antiques and collectibles to resell, I did not even stop at the booths selling new stuff. Internet buyers will do the same thing.

I look forward to the outcome, but as you said in earlier posts, it will be interesting to watch.

Randy Smythe said...


I should have made my caveat bigger for the Collectibles, Vintage and Antique sellers.

If eBay gets rid of Best match in these categories and deals with the fakes etc. and does something like the split screen idea they have been showing around. I think these categories will be fine.

From a business standpoint though, this business just isn't a huge money make for eBay, so they won't invest much in it.

So, in light of all the caveats I guess I would completely agree with you.

Many sellers I've spoken with in these categories seem to be doing fine. Not all, but many.

Anonymous said...

It appears that the blog juice has dried up pretty quickly over here...

Randy Smythe said...

Anonymous, don't judge the "Juice" by the number of comments. I rarely get many comments but the activity on the blog is still humming along.

I'm surprised the story has lasted this long.

Anonymous said...

As a small time seller of family items and heirlooms, I am sad at how difficult eBay has become as a selling venue.
As an eBay participant listening to the stock market dither on the value of the stock, I have taken note of the analysts at Goldman Sachs, Piper Jaffray, Chase, etc. who follow and report on ebay stock valuation. I highlight, clip and forward comments from ebay discussion boards, blogs, power sellers unite, etc, and encourage the investment analyst community to question and followup on some of the verifiable items.
And am pleased to get questions back from research assistants asking how to understand some of what is sent to them.
Facts and reality seem to be starting to percolate through the investment analysts that the eBay offered metrics may not be the best ones for indicating eBay health.
A quick google of analysts following and reporting on ebay will pop their names and emails, and the easiest place to find them (LOL) is the eBay investor page.
I would encourage others to share insights with investment analysts. They are surprisingly responsive. I think they know something is going on, and are trying to understand what it is and how big it is, and how it affects valuation of a share of eBay stock.
So, if you are in the mood, help them out.

Anonymous said...

I already told my buddy who works on Wall St. the same thing - I told him, eBay is going downhill, no matter how they spin the numbers. He wrote back to me and said that he will spread the word.

Never underestimate "The Power of Us All"