EBay’s buyer’s remorse

October 12, 2012

How do you know if you’re in a buyer’s market, or a seller’s?

Offline it’s pretty easy to know. There’s price pressure, abundance and not too many people vying for the same house, commodity or mint condition Pee-Wee Herman doll at the yard sale. In the land of the real, markets aren’t terribly efficient. Before the Internet changed everything, retailers were bound by geography and the ability (and willingness) of people to range. That’s why gas costs a lot more right off the highway exit than it does less than a mile down, where strangers would rather not venture. (Now, of course, there’s an app for that.)

Online, it’s easier to know where the consumer stands. In fact, online, it’s always a buyer’s market. There are, of course, always fixed costs that help determine an item’s price – a book publisher’s monopoly or the cost of jet fuel, say. But a buyer’s power to compare prices from a comfy chair has made it difficult for online sellers to gouge – to insist on a higher price than the market bears – because the market is transparent, fluid and infinite in all directions. Services like Kayak create an almost perfect buyer’s market for air travel, which was already one of the world’s most competitive businesses. Amazon’s ability to offer nearly everything at buyer’s market prices has created a retailing behemoth that doesn’t even need an Apple-like seller’s market to thrive.

And then there’s eBay, an Amazon contemporary with an identity that’s been in crisis for years.

At a press conference this week, eBay – when it wasn’t gushing over the potential of a growing mobile market (the company expects $10 billion in mobile sales annually) – was hyping a site redesign and an enhanced focus on personalization and recommendation. What was once an auction site is now a retail site.

EBay’s latest maneuver is a fresh attempt to shake off its proud roots as a destination where every person could buy and sell quirky collectibles and used clothing. It’s morphing into a more mainstream retailer whose suppliers don’t primarily consist of one-timers emptying their garages and bottom-fishers tolling virtual yard sales.

EBay is channeling a little bit of Etsy and a lot of Amazon. But the question is, in a buyer’s market – and it’s always a buyer’s market in the online world – does the site you’re buying from even matter? To a consumer, what’s the difference between a Kayak and an Orbitz, a Priceline and a Hotwire, an Amazon and an eBay?

Everything is going mobile, and as the screens shrink, the market expands. Buyers don’t care who sells them what, just how well. It’s not Macy’s versus Gimbels anymore. It is products – mostly commoditized now – that consume online consumers, not pretty shelves. It’s about spontaneous, one-click, impulse buys in those idle-time moments waiting for your friend to show up that you once used to stare at your shoes.

This isn’t about discovery or engagement – or even selling. Instant gratification breeds its own buying dynamic. Before I became an Amazon Prime subscriber I bought something from Amazon now and then. But after I subscribed to Prime, because shipping was usually free and fast, I bought a lot, from them, in part to protect my $79-a-year investment and in part because the friction of each purchase had been sanded down. With one click, a new item practically slipped into my mailbox. Prime also cultivates a sense of membership, which is nothing but good for any retailer.

If you can think of it and expend minimal effort getting it, you will. This is the secret of point-of-sale displays (and why parents want the candy bars banned from the checkout line).

Which brings us to eBay and its new look. It jazzes up the place and projects a more upscale feel — definitely stepping away from its bohemian roots. But it has the feel of a victory in a race to nowhere.

Redesigns are a tricky business. Digg dug its grave with one. Craigslist hasn’t bothered to do so once, and thrives, in more or less the same rough waters as eBay, in fact. (It helps to have a business model where you don’t mind leaving money on the table, something eBay, as a public company, cannot.)

Mostly, though, what matters is that a new-and-improved Web strategy doesn’t really matter. The battlefield is elsewhere.

EBay is innovating: Witness eBay Now (unveiled at the New York press conference but only available to San Francisco customers). It’s an “I WANT IT NOW” service, which explains the tiny initial rollout: Order something, and they drive it to you, sometimes within an hour. They aren’t the first to do this – Amazon and Wal-Mart also offer same-day service – but it’s the right kind of thing to experiment with.

Witness also “Stuff”, which creates a record of all your shopping – anywhere online – based on a scan of receipts you’ve been e-mailed from any vendor. It’s like the Amazon Magazine Subscription Manager: It doesn’t make eBay a penny per se, but it does increase the company’s relevance in your life, and that could lead to further engagement.

But there’s so much more for eBay to do. To start with, it needs to stop focusing on the Web. Dazzle customers with experience and not products, which are just commodities. Stop trying to get people to browse as if they were curled up with a nice catalog or wandering around a building. You aren’t the same as a bricks-and-mortar department store, whose customers are forced to shop even as they leave the premises. Online, they can teleport out in a nanosecond (and do).

Instead, focus on fulfillment – give Amazon a run for its money on the delivery and shipping experience. Shipping and handling is still ripe for competition. It’s a major retailing differentiator and an outsize decision factor about whether you will be able to make the sale. If eBay really wanted to compete with Amazon, it could even get into the subsidized tablet game – everybody’s doing it!

Alternatively, it can figure out a way to capture that all-elusive customer loyalty by concentrating on service, not merchandise. By focusing more on the shopping experience than the customer experience in its redesign, eBay seems to be missing the point.

Stores need to disappear, not get prettier. After all, they’re basically already invisible. It’s about price and convenience now. Seller beware.

PHOTO: eBay Inc President and CEO John Donahoe speaks during a news conference in Tokyo, May 9, 2012.   REUTERS/Yuriko Nakao


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Google Merchant is King Now!!! eBay is just a expensive middle man.

Posted by DevilsDelight | Report as abusive

As pointed out in this previous article from 2009, http://www.marketwatch.com/story/third-p arty-business-fuels-amazons-overall-grow th it was third-party sales that were fuelling Amazon’s growth. It was primarily a Reseller platform prior to that and has started to become a Multi-Sided Platform, like eBay. The reason is because there are higher margins being an MSP than a Reseller.
In 2011, it was estimated Amazon’s MSP business accounts for about 30% of its sales of products to consumers http://paidcontent.org/2011/06/07/419-am azons-bezos-mobile-shopping-has-great-ro om-for-improvement/35/. Being an MSP is less costly to set-up but it is harder to scale than a Reseller. A Reseller also takes care of the famous chicken-and-egg problem, getting all sides on board but incurs more cost to do so.

Posted by ldebaets | Report as abusive