With the advent of Ebay’s shift in corporate leadership last week, changes seemed inevitable for the ailing internet giant. In a press conference, new CEO John Donahue noted that Ebay would be shifting its focus away from traditional auctions to fixed prices sales composing 40% of the money generated in the marketplace. In addition, Donahue stated a restructering of the fees associated with a sale, lowering up front cost, but raising the fees associated with final sales. While Ebay touts this as support for making money from successful sellers, ebay members responded by threatening a week long strike in February. Numerous sellers report that a gradual transition to internet pillar amazon as increasing there revenues by decreasing overhead associated with Ebay’s fees pre- and post- sale. While ebay has seen its stock slide throughout 2007, is such a dramatic shift too little too late? I’d say so. Ebay’s business modeled focused on its ability to provide an online auction environment with a plethora of items from all over the globe. Shifting their focus over to fixed-price sales uproots the idea behinds ebay and places them in a position to be crushed by Amazon. While internet users love variety, maybe ebay would do better to improve its auction structure and not try to copy Amazon. A recent study showed that the average Ebay user paid $14 dollars for an item and was willing to pay up to $18. Ebay needs to promote this ”$4 savings idea“ to create a large buyer base and the sellers will come.
One Response to “Ebay Evolution”
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I think you’re right that ebay needs to differentiate itself from amazon rather than copy it. I believe that ebay needs to stop focusing on commodities: things like dvds, game systems, cameras, etc. Most people don’t want to waste a week bidding on these things when they can pick them up at the nearest walmart for about the same price.
Ebay’s strongsuit is what i would call “niche products”: things that appeal to a specific group of people (perhaps a certain sub-culture or generation). These are things like rare antiques, classic cars, or maybe a teenage mutant ninja turtles lunch box. In other words, items you can’t find in stores. These are more than just commodities. These are the sorts of things that people see as part of their identity. For example, a certain classic car might remind someone of when they were young… of a different time that they identify with. These kinds of items help people to cling on to their identity, serving as a tangible reminder of who they are. These items are worth paying big bucks for, they’re worth spending a week of bidding, and they are worth spending a ridiculous amount of money to ship. In other words, ebay’s business model fits the niche market perfectly.
HERE’S THE PROBLEM: the niche market is a much smaller market than the commodity market. If ebay makes the switch, they will no longer be the big guy in the online market place. They will have to settle for a smaller piece of the pie. I’m not sure ebay is willing to do that.