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Summary:

During the last recession, eBay not only prospered but flourished — not so this time around. Over the past year, eBay has de-emphasized auctions and put more focus on “buy-it-now,” fixed-price sales. In some ways, the strategy makes sense. But the move away from the freewheeling bazaar and into tighter competition with the likes of Amazon has resulted in a drop in traffic.

What’s happened to eBay?

During the previous recession, the company thrived, partly because it was still young and growing, but mostly because it offered a place for some people to raise a few bucks quick by selling off their stuff and for others to find bargains that were often better than Amazon — or anywhere else, for that matter.

Take a look at this chart. It shows eBay’s stock against the Nasdaq in 2001 and 2002. This was eBay just before its peak, when it was a freewheeling, town square bazaar where entrepreneurs, hucksters and oddballs met and in many ways, a cultural phenomenon. Hardly a week passed when some bizarre item for sale didn’t make headlines.

ebay1

Fast-forward to the past year, and our current recession, as exemplified in the chart below. Things have reversed. The performance of the Nasdaq is once again abysmal, but it’s still doing better then eBay.

ebay2

In the first week of December, the heart of both holiday shopping and hard times, online traffic was up 9 percent at major online retail sites overall , according to comScore. Amazon’s traffic rose 10 percent and Apple’s surged 29 percent. But eBay’s traffic fell 9 percent.

The shift is a direct result of eBay CEO John Donahoe’s strategy to make eBay more friendly for shoppers. Over the past year, eBay has de-emphasized auctions and put more focus on “buy-it-now,” fixed-price sales.

By instituting a series of dramatic changes in policies and fees, eBay intended to shore up sales. Instead, it may have blunted its unique edge in online auctions and plunged headlong into another market where competition is much more intense. In grooming eBay to be more like Amazon’s merchants, Donahoe has created a competitor, but one that is growing more slowly. Indeed, analysts are starting to question the wisdom of the move. This morning, one downgraded eBay while another cut earnings estimate for the year, noting that the transition to fixed prices from auctions is being hurt by the recession.

In some ways, the strategy makes sense. I, for one, never took to eBay’s auctions, preferring the simplicity of “buy it now.” And while I recognize that eBay is now a safer environment to purchase things, I still compare its prices and seller ratings with those of Amazon and other sites before making a purchase.

So as a consumer, I welcome Donahoe’s changes. But I still wonder if he didn’t make a big blunder for eBay itself. Legions of buyers loved the thrill of winning an eBay auction, the eclectic collection of strange things for sale, and the feeling of wandering around an open market where nearly anything might happen.

The freewheeling bazaar is fading away. Instead, we are left with something that is, for better or worse, less dangerous.

We are left with just another strip mall on the Internet.

Chart images courtesy of BigCharts.com.

  1. ebayinwonderland Wednesday, December 10, 2008

    Have you noticed that unique items are disappearing, not the oddball items, but wonderful unique items that ebay used to be known for? Replaced with drop ship mega sellers? buy.com, shoplet, trading card seller and just recently smartbargains and this is supposed to improve the buyer experience?

    Not likely.

    Sellers are leaving in droves because the higher fees and horrible search engine, dysfunction feedback and double standard detailed seller star ratings are driving them off, voluntarily and otherwise.

    Horrible and impossible for the majority of sellers.

    It’s fading faster than a sunset.

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    1. Recently I put a cellphone of mine up on ebay.. the cellphone right now sells for $199.00 unlocked on several sites.. I listed my cellphone on ebay with a very, very low starting price of just 99 cents (of course to save on listings fees) and relied on market value to push the price up to at least a reasonable value of one hundred dollars since the phone was rarely used but out of box.. I had very good photos of the phone up with an 8MP Sony cam.. they were crystal clear.. I also included a 2GB Internal storage card.. After 7 long days.. my phone ended at $17.00????????? I mean there was no way on this planet was I giving this phone to anyone for $17.00 I asked the buyer to cancel the item through an ebay link where no one would be out any money.. of course the winning bidder cancelled my request to cancel the win and he told me “you have to sell it now, that’s what ebay’s about” I told him to jump off a cliff and that ‘if ebay isn’t getting any buyers anymore that that wasn’t my problem.. I also added that I will recognize this ‘lack of generation’ and move away from the ebay option at least for now.. I am also noticing that ebay now is hosting sales from ‘Power Sellers’ who basically are selling things from the insides of corporations.. sellouts, overstocks, etc.. might as well just go to Overstock.com or Amazon if I want that.. Ebay’s problem is their fees and the fact that regular everyday people are judged by every single purchase or sell through their ‘feedback’ system.. this might have been an okay idea in the beginning but if you do the feedback thing long enough you just run away from it.. ebay is the only venue where you’re rated everytime u do a transaction.. imagine if real life was like that and you had your feedback posted on your forehead for everyone to see? Who would ever leave home?

      Ebay’s fees are not reasonable.. ie., when you list an item ebay charges you at the entrance.. and if you sell an item.. ebay charges you at the exit.. what is this.. ebay fees, ebay fees, and more ebay fees.. if you want your text to be bold you have to pay for it, if you want your ebay window to have a border you pay for it.. it’s just rediculous.. it’s just money, money, money!! It insults people.. and over time yes.. ebay will kill itself.. Craigslist is the same thing as ebay.. you list an item with photos.. and people buy and sell.. Craigslist has ‘ZERO’ fees and ‘ZERO’ feedbacks.. You do the math.. Ebay is just another greedy corporation heading towards it’s own greedy demise.. and ya know what as a former ebay lover.. I wouldn’t even care if it shut down tomorrow for good!!! We can all just go back to throwing our junk out and not have to go to the dang post office so much..

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  2. John Donahoe will be taught in business school as an example of what not to do.

    He killed eBay in less than one year. Shocking.

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  3. Claeton Giordano Wednesday, December 10, 2008

    Even if eBay was able to compete with the other fixed-price online marketplaces, what would its brand stand for?
    More than entering a fiercely competitive market, eBay has lost its identity.
    That is death in consumer-land.

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  4. The only thing keeping Ebay going right now are the buyers who have been on the site for years and don’t want to learn to use other venues. With each small seller they lose they also lose some buyers. The scales are tipping and soon buyers will be forced to shop other venues in order to buy from those small sellers again. As one of those small sellers forced off ebay by Best Match I look forward to the day Ebay sinks down and dies! They’ve shown such callous greed and total disrespect for small sellers that they’ve earned it!

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  5. Ebay has it coming. They rule as if they have nobody to answer to. They turned their back on auctions and turned their back on sellers. The new feedback policy alone gives far too large an advantage to buyers when twisting the arm of sellers to give them what they want or else. I don’t know who the brain trust was at Ebay that thought making the whole buyer seller scales uneven would help Ebay in any way. Hard fact…ebay makes nothing if sellers don’t post something for sale. So although buyer protections, etc need to be in place, making the playing field uneven is a a huge mistake. Ebay should have been nothing more than a flea market that rents space. They should have never gotten involved in enforcement, etc as they have. Bottom line is the feedbacks eventually solve every issue, good or bad. But not if the feedback is now held hostage by buyers. Ebay is now in trouble and they deserve it. bring on the next one and I will list my sales there.

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  6. “So as a consumer, I welcome Donahoe’s changes. But I still wonder if he didn’t make a big blunder for eBay itself. Legions of buyers loved the thrill of winning an eBay auction, the eclectic collection of strange things for sale, and the feeling of wandering around an open market where nearly anything might happen.”

    Hey That’s mighty white of you but what about the millions of displaced eBay sellers that are being forced to leave the site????? less than 1/10 of 1% of all sales were problematic with fraud & eBay could have easily handled it if they really wanted to but in doing so they would have to admit there was a problem .. Now because of all eBay’s failed policies tens of thousands of sellers who made all or most their income are now out in the streets & I hear nothing from you guys in the suits about these displaced sellers .. But if walmart lays off 500 people it’s front page news!!!!

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  7. John Donahoe is such an ego driven moron, even if he knows in his heart that his “disruptive innovations” aren’t working, he won’t admit it. I’ve been with Ebay for over 10 years, with 100% feedback, and they won’t get another dime from me, a SELLER, until things change. The main change needed is the termination of John Donahoe. I don’t have enough room to list all the stupid changes he/they have enacted, but just visit their own discussion boards and see for yourself.

    I, along with hundreds of former Ebay’ers, have since gone to Bonanzle and love it. It’s a friendly atmosphere, uncomplicated protocol, and reasonable fees.

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  8. @GhostofEbayPast: So, what you’re commenting on is only what the public has seen over the past year or so. Donahoe, alone as well as when reporting to Meg Whitman, has been part of bad decisions made for at least three years. It’s been a long time in the making.

    What’s really scary is the number of eBay incompetents who have gone on to leadership positions at other SV companies.

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  9. Cherie is absolutely correct! This has been in the making for a few years. Ebay has evolved into not much more than a venue for the large drop-ship sellers, whose wares you can find at your local discount stores. The “mom and pop” sellers of the unique and interesting items have been driven off. As I said, the problems are too many to list here.

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  10. I stopped selling on Ebay in Jan 08 as soon as I read of the then new changes (especially the feedback changes and being graded on DSRs). I have since closed my Ebay and PayPal accounts.
    As a seller, there is no way I will play Ebay’s game. I am self employed because I like to make my own decisions and reap; the consequences or rewards of my own actions- but under Ebay’s new regime, everyone must fit into a narrow mold; and the type of buyers that they are now attracting by pandering to idiots and scammers, are NOT the type of customers I want. And when a non-paying bidder, scammer or competitor can ruin your business through DSRs and feedback (as happened to a friend of mine), anyone who values their name and reputation will abandon the Ebay ship before they fall victim to such a fate through no fault of their own.
    As a buyer, I simply do not trust anyone who would continue to sell on such a venue- as their willingness to stay under the current atmosphere says to me that they afre concerned only with making a buck at any cost, and not about doing what is right, or running their business in the best way- so I no longer have any use for Ebay as a buyer or seller; and ditto for all my friends.

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