Ebay - an immature company in a mature market

Ebay continues to flounder about like a beached whale, but Wall st analysts and other Ebay watchers seem to stand around trying too puzzle out why. So let me try and make sense of it, although of course this only my own take on the situation, and others may wish to add their own comments; well I hope so!

The internet auction market has grown exponentially in the last ten years, mainly as a result of Ebay’s success. But now things are starting to slow down. Most people who want to use internet auctions either as buyers or sellers now do so, the modest growth in Ebay’s active users over the last year seems to confirm this. Auctions were new and exciting but nowadays they are reverting to their traditional role of a place to trade items that are difficult to value, such as antiques and original works of art; no-one wants to get involved in a bidding war or wait days when all they want is a new memory card for their digital camera.

So Ebay is desperately looking for some way of maintaining the growth rate of previous years that investors are looking for, but is unable to achieve. Such strategies as raising fees, changing the balance of promoting fixed-price against auction listings, takeovers that make little commercial sense and under the counter deals with large companies can be seen as ways of achieving this, but it’s not working and Ebay’s share price continues to slide.

What is the answer? Could it be to go back to its roots, acknowledge that it is in a mature market , provide first-class customer service to give the steady but not spectacular growth that would make it an investment with the sort of P/E ratio that Amazon is enjoying. That would bring  a smile to the faces of both users and investors!

Ebid - an update

A few weeks ago, I wrote a few words in favour of Ebid, which I thought looked promising as an alternative to Ebay. Since then, things have progressed. The site now has over 820,000 listings; it is difficult to measure the real expansion of the site because of the way in which some large sellers manage their listings, but I would think that a steady 10% growth has taken place in the past copule of months and looks as if it will continue as the number of users regularly increases by several hundred a day.

I have listed more books and now have about 80 listed as I write. The process is easy, but, and this is a big but, to take full advantage of the site it is necessary to take out the seller+ membership, the £49.99 lifetime offer is the best value. I decided to do this as I felt that the advantages were worth about £4 per month spread over a year (the internet is changing rapidly and any further period becomes uncertain). I am impressed by the results; feel free to take a look at my shop:

http://uk.four.ebid.net/perl/main.cgi?mo=user-store&title=Leapingcat-Books

and see what you think.

I have also been buying on Ebid, again the process was hassle-free and friendly. What was best was that it was an out-of-print railway book by a small publisher, the sort of book you used to be only able to find on Ebay; Ebid is really becoming a serious alternative now with the range of items for sale. Note for sellers - the seller gave me positive feedback as soon as I had paid, it feels a lot better than the tit-for-tat sometimes found.

A warning to auction sites - Pareto is dead

Just over a century ago, the Italian economist Pareto observes that 20% of the population owned 80% of the wealth. Other economists and engineers found that this rule applied in all sorts of other situations; supermarkets got 80% of their sales from 20% of their lines, 80% of quality problems in factories were caused by 20% of the possible faults and so on.

This principle appeared to work well and it lasted for a century, but now the internet has upset the apple cart. The cost of distributing on-line music has fallen to such a level that it is now not only possible, but profitable to hold a stock of literally millions of recordings, including those that are only sold in tiny numbers, instead of the old model of concentrating on just the best sellers.

This idea has been developed into the theory of ‘Long Tail Economics’ by economist Chris Anderson (you can find out more from his blog: http://www.thelongtail.com/) The basic principle is that an analysis of sales would show a short ‘head’ of top sellers plus a long ‘tail’ of lower volume sellers and typically the tail would be 50% of the total rather than the 20% that Pareto would have suggested.

Ok, this is fine in theory, but what does it mean for the world of online auctions. Firstly they need to have a wide a range of products as possible, and not discourage any particular type of seller. You can now see why Ebay will be in trouble if it continues to discriminate in every way against small sellers and in favour of large commodity-style sellers. Not only will it drive away buyers who cannot find what they want, but they will lose a substantial slice of their income from the vast number of sales from the sellers they will lose. This theory also explains the lively discussion in the Tazbar forums by members who are unable to find what they want. Even 90,000 listings is now too small for a site to give buyers everything that they want.

An interesting example of the long tail in practice is Amazon, not strictly speaking an auction site, but in many ways a competitor. They sell new books themselves, but also have opened the site to third-party sellers. Everyone comptese on a level playing field, books for example are listed in order  of price. That means that it doesn’t matter whether the seller is an individual with a handful of books, a small growing company, a large established company or even Amazon itself, the criteria for listing books remain the same. Fees may less for large-scale listers, but the system is transparent. Amazon quietly go from strength to strength while ebay are floundering.

So, what is the lesson. For the smaller sites, encourage as may sellers as possible. Ebid, Tazbar and Specialistauctions are doing just this with their free listings and in some cases no FVFs in return for a paid subscrition. Whether you list one item or 10,000 it will get equal prominence, and so give the buyer a better deal too. For sellers, list, list, list and market. Market the site as well as you listings; you will attract buyers to other sellers items, but they in turn will be doing the same for you as the total rises. This is called a win -win game unlike a zero-sum game where one side gains at the expense of the other, but I think I’ll stop now, enough economics and statistics for one day!

 

Tazbar - The buyer’s tale

Although I have had a few sales on Tazbar, I have only recently made my first purchase there. I needed a new wristwatch for everyday wear, but instead of the normal suspects went to Tazbar first. I soon found what I wanted, the search was easy, bought it with their ‘buy now’ and the watch was posted the next morning and arrived the day after. I was pleased with every aspect from the actual watch, to the way feedback was given almost as soon as I had paid, little things like that do count. I will definitely make Tazbar the first place to visit whan I next want to buy something.

Ebid - the one to watch?

More and more buyers and sellers are looking to alternative online auction sites, not just because they are unhappy with the way Ebay is being run, but for the very positive reason of exploring the other venues that are out there and seeing if there are one or more that will fit their requirements. In the UK, at any rate, the biggest of these sites is ebid, and I believe that at present it is the one that could grow quite dramatically. It is difficult to say what their total auction count is as it appears that one large lister of DVDs is revising his auctions, but there about 600,000 auctions plus up to about 250,000 from this one company. More to the point for me, there are over 80,000 books listed, quite a high percentage, which should make it  a magnet for bookbuyers.

So, I have recently joined and put the first few books on. The signing up process was straightforward, but with one or two checks that reassured me that security seemed tight. The listing process also caused few problems.

Only time will tell if I have made the right decision, but sites like ebid and Tazbar, for example have the advantage that it is either free to list with fees only paid when you make a sale or you can pay a modest subscription and not even have to pay any final value fees. This means that it is now feasible to list a large number of lower priced books without fees swallowing up most of the return, as would happen with ebay. Of course it is still daft to bother with those unsaleable run of the mill books, such as last year’s discarded bestsellers, so Ebid and similar sites should see an influx of good quality reasonably priced books. I’m already looking  forward to it.

Ebay - thinking the unthinkable?

Most discussion about Ebay either accepts that its monopoly position means that it’s here to stay, or wish for its demise without spelling out how it may occur. But I can see Ebay actually failing if a credible alternative comes along. So far the usual suspects, Google, Microsoft, etc have shown no interest, they will stick to the things they do best and if they expand it will be into new fields, social networking etc that will tie in with their core businesses.

But look to the East, where the dominant force in China is Alibaba, a business auction site, and its consumer stablemate, Taobao. If they decide to move westwards, and the unrest among Ebay users can be exploited, then anything could happen. In the meantime, several existing sites, notably Ebid in the UK and OLA (US) seem to growing to that critical size where they could appear above the radar. Interesting times may lay ahead.

A new way of looking at niche auction sites

I have long thought that the best way for online auctions to develop is through niche sites for particular interests, alongside the traditional type of site that offers everything. But perhaps the auction side should be added on to a site or forum that caters for that interest, rather than standing alone.

So that I don’t show any bias I am using vintage clothing as an example, as my knowledge of it is confined to seeing what people were wearing at last year’s Goodwood Revival, but it seems to be a very popular interest. If a site were set up to provide a forum, announce news, have technical/historical features and a gallery of photos or period illustrations, then there is a ready-made community of potential buyers and sellers, and an auction linked to the site could be very successful. Obviously, the number of members would be relatively small, but could make up for that in their keener interest.

Anyway it’s food for thought, and I would be keen to hear of anything along those lines already in existence.

Ebay strike has ended, now read this please

Respected internet auction information and forum site pheebay has published this post by leading member Alter-Ego on its news page. I think it gives such a good well-written insight and positive suggestions that I have given a link to it here:

http://www.pheebay.com/?end-of-ebay-strike-so-another-boycott-begins-166.html

I don’t think I need to add anything, this article says it all. Please read it carefully and in full, it is well worth the effort.

Tazbar Strike Again!

Alternative on-line auction site Tazbar have come up with an ingenious idea to capitalise on the dissatisfaction with proposed changes on Ebay to the feedback system and increased charges, which has led to some sellers boycotting Ebay this week. They are holding an auction at a nominal price for what amounts to the right to enter a competition with prizes worth a  total of £1825:

http://www.tazbar.com/Auction/Win_1000_and_support_the_Ebay_Boycott_AuctionaVVBNU94MHJLdUhqS0xOMXJSMlR0Zz090

I think that this a clever move and will attract the right type of publicity for Tazbar.

 Meanwhile auction news and comment site Pheebay gives its usual well-balanced view of ebay’s situation:

http://www.pheebay.com/?18th-feb-is-ebay-strike-day-143.html

Ebay alternatives - What’s in it for buyers

The Ebay alternatives are promoting themselves as a cheapercplace to sell than Ebay, but is that the sort of thing to attract buyers. I don’t think so, so I’m reducing the prices of paperback books that I’m selling on Tazbar so that they all start at 99p instead of the £1.49 that I would have started at on Ebay. The Ebay fees would have amounted to 34p (assuming half of the books sold) but the Tazbar fee would only be 3p, so I am  less than 20p out of pocket by reducing the price by 50p, but better sales should make up for this. You can work out all sorts of options for yourself; if you have one of the Tazbar monthly subscriptions, potential savings can be even more if you sell enough.

I’m selling my own collection, so profit doesn’t come into it, but for a business seller cashflow is all important, and this strategy could pay off. At present there are only a couple of paperbacks on, but as time allows, i will be increasing that number over the next few days and weeks: http://www.tazbar.com/Seller/leapingcat