Saturday, October 11, 2008

Amid the Gloom, an E-Commerce War

Brad Stone of the NY Times, has written an excellent piece on the battle between Amazon and eBay -- I remember him telling me, it was going to run in the Sunday print edition as well. So if you get the NY Times check it out.

There are too many interesting observations to quote in this one blog post, so head on over to the NY Times and read the article. Or just click on the title of this post.

Oh okay, I'll quote one section 

In a series of interviews, Mr. Donahoe acknowledged that eBay, based in San Jose, Calif., didn’t adapt fast enough to shifting e-commerce winds. He now embraces a “turnaround mind-set” and is refocusing its Web marketplace toward shoppers who don’t want to waste time in online auctions.

“There are times when I wish we can close this store and just open a new store, but we can’t,” he said. “We need to make bolder, more aggressive changes to the eBay ecosystem even if they are unpopular.”

Blast from the Past: I dug a post out of the archives, dealing with the differences in mangement styles between Jeff Bezos and Meg Whitman, while Meg was still with us (at eBay). Looks like Brad Stone obsevered much the same thing. John Donahoe's stubburn determination to accomplish his goal in spite of all of the warning signs around him are not a good sign. He's just doing what he trained to do.


Just my 15%

18 comments:

Johnny Doom said...

Randy you should write a book on the fall of eBay. Knock out a treatment and secure a good lit agent. An e-commerce text book for business students would generate a nice revenue for you, probably for the rest of your life. Also think about securing a good publicist, now. Jim Cramer, CNN, Fox, MSNBC they would all book you no problem. The greed and destruction of eBay by Mr. Donahoe and friends is emblematic of many of the current problems on Wall st.

Ankur said...

Bezos versus Donahoe -- not even a comparison. Bezos is a visionary, customer-centric, and is grounded even though he is a genius.

Donahoe is a career-consultant and eBay is full of former Bain people.

eBay is in bed with Bain and the results are evident -- it's become a company that analyzes, builds "decks", and makes recommendations, but does nothing.

eBay is the new AOL.

Randy said...

Ankur, you sound like you have some first hand experience with this. If so I'm sorry.

Do you think if the captain of Titanic knew the iceberg was bigger below the surface than on top, he would have stayed the course?

JD, is staying the course while everybody shouts "ICEBERG"

Randy said...

Johnny Doom, thanks for the vote of confidence, but all I have are observations, very little if any first hand knowledge of what's happening inside the hallowed walls.

ms.pat said...

I read that article this morning. Too bad it didn't allow for comments. Its kind of evident the author wrote from notes he took directly from Donahoe. It was Donahoe's vision and not a word about how flawed that vision is. Not a word about Best Match and how its ruining business! Just about every seller I knew on the boards has stopped listing or severly cut down their listings. No matter what Donahoe wants to do with his site - if it includes the sellers...then I'd say he's in trouble and too inexperienced in the ways of online sales to see it! Its not the economy - and its not that people want fixed price - heck they had Ebay Express and BIN for that! I'm selling okay OFF ebay but can't sell a thing ON ebay - and I have a perfect 10 year record. Never a negative, 3,000 feedbacks and 5.0 DSR's. So...if he had any intention of keeping sellers like myself you sure can't prove it to me. All we've seen is higher fees and rules, rules, rules! I see Ebay as doomed unless they get rid of the present management and I think that may happen at the end of quarter 1 next year after a disasterous holiday season (I think I already said that on here). :-)

nadine said...

I agree with Ms. Pat. Donahoe's understanding of eBay's marketplace is taken at face value without any check of his understanding. eBay surveys are taken for gospel. You would think somebody could point out the fallacy of ebay's thinking that they are dealing with one marketplace instead of many? Walmart and Sotheby's do not serve the same customer nor have the same requirements. But this is too much for eBay to get.

I was amused to hear that eBay had been hesitant to anger sellers. How could you tell? If they really spent the last three years angering sellers by accident, then they are even more clueless than I thought possible. Did you get a sense of Donahoe's indignation with the sellers? Like who are they to stand in the way of progress, just because they are paying customers?

Either eBay is still deluding itself that most sellers are happy with the changes, or they think sellers are addicts who can't leave. The point of diminishing returns cannot be far off.

Cliff said...

I really enjoyed that article, Randy, thanks for posting.

Great account of Amazon's early troubles in courting the 3P sellers, how they righted those missteps to catch up to eBay and how eBay is now forced to take risks in attempting to reestablish their previous dominance.

Whether you agree with those steps or not I see as another story (one chronicled pretty well right here on My Blog Utopia!), but as a piece from basically an outsider I thought Stone did a great job here.

Pretty cool that FBA was mentioned too!

Thanks, Cliff

Anonymous said...

Fascinating constrast between what Donahoe thinks eBay's problems are, vs. the viewpoints of the unnamed former management employees interviewed by Forbes.

http://www.forbes.com/home/2008/10/06/ebay-donahoe-whitman-tech-enter-cz_vb_1006ebay.html

Appears Donahoe doesn't get "it" yet.

Randy Smythe said...

Anonymous,

That is the disconnect. John Donahoe, is doing the turn-around, which by definition involves pain to a number of stake-holders. He thinks he will come out on the other side of this with a stronger company.

Those insiders quoted in the Forbes article, understand what is actually happening. JD, believes it will all work out in the end.

John Donahoe

Ankur said...

I was at amazon for 5 years, then lured to join an eBay company (not eBay Marketplaces) for cash money. Big mistake. I quickly moved back to Amazon 8 months later but this time to A9.

NYT, WSJ, Forbes are close -- but they miss the mark: the big, huge, difference between the two are cultural. The type of people that walk in the amazon door are 110% different than the type of people that walk in the eBay door.

On the one hand, you've got smart, mostly technical people (many with Phd's like me). On the other hand, you have mostly MBA's.

Amazon places a very high value on a pedigree of strong technical skills and a hard science background AND that you can manage a P&L. In fact, if you do not have a strong technical background -- an unwritten rule is that you probably won't advance in the company.

Another thing: there are no outside consultants -- no BCG, Monitor, Mckinsey, or Bain -- nobody from those firms have ever stepped onto the Amazon campus or to a fulfillment center -- we solve our own problems and don't pay big cash money to have others solve it for us. Again, a huge difference in culture.

The people make the company.

Randy said...

Ankur,

I would agree whole-heartedly with that. The cultures are much different.

Amazon is a technology company that happens to be really good at selling product.

eBay is a marketing company that is really good at maximizing profit and though I'm sure eBay has some great technical talent, the MBA's make the decisions.

Thanks for the insight.

Anonymous said...

Randy-
Do you know why Ebay doesn't put in a cart. Is it because of the Paypal system?

When I shop at Amazon, which is frequently, I buy from different sellers plus new items from Amazon. I'm sure having a cart maximizes profit.

Wouldn't you think this would be a priority?

Randy Smythe said...

Anonymous,

They already have the cart built, it was used for Express, and it will most likely be launched in mid-2009 when they remove Third Party checkout, this is why they are working so hard to get everybody to use Free Shipping.

These are just my observations, I have no inside information.

nadine said...

The Wall Street Journal doesn't sound confident about the latest round of ebay changes:

Mr. Donahoe has instituted various changes to the auction site this year to attract repeat buyers and rejuvenate trading, such as requiring sellers to improve customer service in exchange for certain perks, but results have been mixed.

The economic slowdown has also hurt consumer spending, on which eBay depends for its auctions site to succeed.

At the same time, PayPal's revenue growth has outpaced that of eBay's traditional business, growing 33% in the second quarter compared with 13% at eBay's marketplaces unit, which includes auction and fixed-priced sales.

Overall, eBay posted growth of 20% in the second quarter.

Sellers' friction over PayPal stems in part from a change that eBay is making later this month. That's when eBay will start requiring all transactions on its auction site to be completed online.

The change means customers and sellers who had once used checks and money orders to close a sale will now only be able to use credit cards or services such as PayPal.

EBay said the shift helps the company catch up with other e-commerce destinations such as Amazon.com and Gap.com, where transactions are conducted only via credit cards and online payments.

But merchants such as Michele Godino, who sells antiques on eBay, said she feels as if she and other merchants are increasingly being forced to use PayPal to produce more revenue for eBay. "As a business owner and an adult, I feel like I should determine what payments I accept," she said.

http://online.wsj.com/article/SB122329498978907449.html?mg=com-wsj

ms.pat said...

I think Ebay's problem in a nutshell is that they are trying to force individual little business owners to abide by hard and fast rules. If those rules had been in place originally then a seller coming in knows he has to abide by them...but up till now ebay sellers were literally free to be their own boss and they're not going to give up that freedom without one heck of a fight. Also, Ebay WANTS things...like sellers to give free shipping. Don't know about powersellers but small sellers got nothing but the order...offer free shipping or be buried in the listings! Well, I think Ebay has now reached a point with small sellers where they frankly just say f**k U and leave! I know cause I was one of them! I'm tired of the unfairness and being led around by the nose from a company that is too cheap and too lazy and probably too stupid to put effort into advertising their site and enticing in buyers. Just sitting back and thinking up more and more rules to lay on sellers ain't gonna cover it! I can hand out coupons for that matter!

Tony P. said...

Amazon is a technology company that happens to be really good at selling product.

eBay is a marketing company that is really good at maximizing profit and though I'm sure eBay has some great technical talent, the MBA's make the decisions.



Randy nails it with these remarks, but my *simple* brain likes to think of them in a different manner. Both companies are technology companies, irrespective of what ebay may "think" along that regard.

If given the task to come up with some sort of "numerical calculating device" out of very basic materials:

Amazon would invent the Abacus. Neat, compact and given to easily representing any mathmatical formula and / or numeral.

Ebay would provide a couple-dozen bushel baskets and a bag of beans. The all-important "analyzing" would be far easier.

Randy Smythe said...

Tony,

Your comment are always much more colorful than mine.

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