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Summary:

What happens when your turnaround takes an about-face? Although eBay CEO John Donahoe has implemented changes to drive new business in the company’s core marketplace division, it’s looking like he needs to come up with some additional new ways to bring consumers back to the site.

What happens when your turnaround takes an about-face? eBay CEO John Donahoe may find out the answer to that question if he isn’t careful. Although Donahoe has been implementing a lot of changes aimed at driving new business in the company’s core marketplace division, it’s looking like he needs to come up with some additional ways to bring consumers and sellers back to the site.

Next Wednesday, eBay is expected to report its financial results for the last three months of 2009, which includes the holiday season. The results aren’t likely to be as bad as a year ago — when Donahoe had to apologize to investors for a disappointing performance – but also aren’t likely to be as impressive as you’d expect when a turnaround is working. Analysts are looking for an incremental rise in both revenue and profit.

Perhaps eBay’s efforts to repair its business have been too focused on impressing investors. True, eBay’s stock is up 67 percent in the past year. But the company isn’t doing well with either consumers or buyers — who, unlike investors, actually contribute to its revenue. When Piper Jaffray asked consumers last month which site had the best shopping experience, only 13 percent said eBay, down from 27 percent in March 2009. Another 65 percent said Amazon was the best, up from a prior 36 percent.

Amazon is also appealing to eBay’s key customers, the PowerSellers. When JP Morgan surveyed them, 54 percent had a negative opinion of eBay, while 69 percent viewed Amazon positively. Even worse, PowerSellers sold 56 percent of their goods on eBay last year, down from 65 percent in 2008. In short, all that tinkering with eBay’s marketplace isn’t reversing the flow of buyers and sellers from eBay to Amazon.

So what’s it going to take to return an allure to eBay’s site? There aren’t a lot of appealing options. But it could start by reaching out to its most vocal critics. The comments section of many articles and blog posts concerning eBay (including some here) blossom with angry rants from disenchanted, often alienated eBay sellers.

eBay’s stance has long been to dismiss them as a vocal minority, which worked for a while. But the web is a mighty bullhorn amplifying the complaints of the disenchanted — whether you agree with their complaints or not. After a while it taints the brand in the eyes of others, as companies that have set up fire brigades to extinguish complaints on Twitter have learned all too well.

To win back more consumers, eBay can also go head-to-head with Amazon at its own game: heavy discounting. Part of the appeal of the auction-driven commerce that eBay has moved away from was that it held the promise of a bargain price. Now that eBay is pushing the fixed-price format, many consumers don’t see much of a difference between eBay and Amazon — except that Amazon has a stronger image as a trusted clearinghouse for low-priced goods.

Often, many sellers offer the same item on eBay with no difference in their buy-it-now prices. eBay could encourage deeper discounts by placing them higher in search results or in featured listings. The company could also renew its image as a low-cost e-tailer with commercials that are more focused and less baffling that its “IT” campaign.

Of course, going up against Amazon on discounts isn’t easy, as Wal-Mart well knows. And a discount strategy could disappoint the same investors that eBay has been working so hard to impress. But if the company continues to lose market share to Amazon, it will have a bigger problem than irate shareholders. It will have a failed turnaround.

In-post image courtesy of Wikimedia Commons

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  1. When you end up spending money and exorbitant amount of time to sell something and you have no recourse to protect yourself, it no longer becomes feasible for the average Joe to have an impromptu garage sale on eBay. The charges alone through both eBay and Paypal are astronomical. Why do that when Craig’s List can do it for free? It isn’t like eBay helps the seller. I sold a computer for $100 less than what I was hoping to get and then had to pay $75 in charges for all the transactions. I have been ripped off in more ways than I can count from bad information on shipping charges to unscrupulous people that bid, win and then want to do some whacko type of transaction. Then there is the poor shipping and the imperative nature of having an additional cost for insurance lest we lose our shirt from people who say that the product arrived broken, when it is fine. On the other end, I have purchased two things through eBay that turned out to be junk. One was a $1500 sink and the other was a charger for my laptop. When a transaction goes south, it is wonderful to be able to walk back into a store and see someone face to face to get help. eBay has NEVER stood behind their service or products. It is harder to find someone to help through eBay in times like that than it is to take a trip to the moon. It is a great idea as long as everyone is acting reputably. For those times, we’ve had a great experience.

  2. The downfall of Ebay must be the most retarded story of any big tech company failing. They have nobody else to blame but themselves. They screwed themselves from both ends – seller and buyer. It’s almost as if they identified the exact things which made them a huge hit among sellers and buyers in the first place, and then surgically removed those things from their business. It’s akin to committing suicide by cutting out your own vital organs. The subsequent attempts at a turn around are like those of a person who has lost half a brain. How can they be so blind? Oh, they must have also poked out their eyes…

  3. If Ebay want’s to fix itself it needs to drop the lame idea of competing with Amazon and go back to regular auctions.

    As a buyer I hate all fo the knockoff chinese crap listen in bulk on Ebay and I HATE Buy it Now. I don’t even bother with any listing that’s “Buy it Now” or has a “reserve”. Reserve is ridiculous as well. Either you want to sell it or not. Don’t go putting a “reserve” of 100 dollar on something you list for a dollar just to “catch the bargain crowd”. Those people aren’t going to bid on your crap in the first place.

    Also as a sell, these bulk listings are annoying as well. They clutter up the whole place and now, my listing, as few as they are, can’t get exposure unless I spend a zillion dollars on “featured item placement”.

    The whole system is just crap anymore, I’ll admit I never used it much to begin with, not next to all of the “power sellers” but I did use it pretty regularly int he past.

    Also I agree with Vera Berry about bad transactions. I got burned on several video games once all being knockoffs and I’m exceptionally careful when it comes to buying video games from places like this to AVOID this sort of problem.

  4. Jason Collins Monday, January 18, 2010

    Also, let us not forget that eBay’s brand was on one of the largest and most profitable affiliate marketing program in the history of affiliate marketing. eBay systematically dismantled this program and destroyed any trust and credibility among independent internet publishers.

    The end of the eBay affiliate program began when they moved Steve Hartman out of his position in “on-site advertising” and into the directorship of the affiliate program. Hartman is the guy that convinced eBay to put third-party ads on ebay’s site. Google “penis pill ads on ebay” if you are unfamiliar with this fiasco. Hartman then deduced that it would be a good idea to drive traffic AWAY from eBay by placing contextual ads at the bottom of search results.

    Hartman has since left eBay and is currently pursuing an illustrious career in the Mini-Storage business on the East coast (seriously).

    Just like with their marketplace changes, eBay too the things that worked for affiliates and removed them from the program and along with it went the profit for the publishers. Those publishers left in droves and took their traffic with then. Many publishers pointed their magic traffic wands at Amazon and that can account for a portion of that companies growth.

  5. Isaias Moises Monday, January 18, 2010

    You ask “So what’s it going to take to return an allure to eBay’s site?”

    Let’s start with this.

    Ebay and PayPal now help dishonest buyers steal from honest sellers through the PayPal “Significantly Not As Described” (SNAD) process.

    This has been going on for months. Both eBay and PayPal’s executive offices know about it from numerous reports by angry sellers. Ebay’s so called “Seller Advocate” knows about it.

    Yet it continues.

    What sort of company would knowingly participate in theft from their paying customers, the sellers?

    Any buyer can report an item bought with PayPal on eBay as “significantly not as described”. PayPal tells the seller to return the item with Delivery Confirmation. When PayPal receives the Delivery Confirmation number, the buyer’s money is automatically refunded. It doesn’t matter what the buyer returns to the seller, dirt, sand, air – the Delivery Confirmation number triggers a refund to the buyer.

    You would have to be crazy to sell anything of value on John Donahoe’s eBay.

    Again I ask, What sort of company would knowingly aid in theft from their paying customers, the sellers?

  6. Isaias Moises Monday, January 18, 2010

    Correction – in my earlier post, I wrote

    “PayPal tells the SELLER to return the item” It should read. “PayPal tells the BUYER to return the item”.

  7. “But the web is a mighty bullhorn amplifying the complaints of the disenchanted — whether you agree with their complaints or not.”

    The “mighty bullhorn” is a fantastic metaphor – may not be unique, but I haven’t heard that phrase before.

    I’ll comment that as a buyer who hasn’t used eBay in a few years, my current naïve but likely “average” user impression is that eBay is poisoned with fraudulent sellers and a problematic payment processor in PayPal which makes me believe that there is at least a 50% chance that I will have not only a negative experience when transacting on eBay, but an experience that will cost me money.

    It’s one thing to have a bad customer experience such as poor customer support so that it takes you 2 or 3x as long to get an issue resolved – your cost is typically time and not financial. It’s an entirely different matter when it’s not just a time cost but an actual monetary cost involved.

    I’d much rather use free local classifieds if I’m looking to buy or sell used items as I feel that I can control a lot more of the uncertainty compared to an auction. I realize that eBay has hedged somewhat against this with their Kijiji investment, but it is unlikely that will ever yield the kind of revenue and profit that their auction business model ever has.

  8. From day one, John Donahoe has ignored the basic premise that eBay’s most frequent buyers were in fact it’s small sellers too.

    From the day Donahoe began alienating small sellers with system, search and policy changes aimed at improving the lot of his preferred class of Diamond Sellers, at the expense of small sellers.

    Small sellers are less successful on Donahoe’s eBay, so they buy less too.

    There is an old adage in retail that says never give your customers a reason to try out the competition as they may never return.

    John Donahoe has been the prime motivator behind sellers abandoning eBay as a platform and migrating to other venues.

    Many are finding huge success at Amazon, others have flocked to smaller sites, while still others took the revenue they once would have forked over to eBay for listing fees and invested them into their own websites with great success.

    Mr Donahoe has been oblivious to the fact that his policy, search and system changes have been the root cause of eBays steady decline.

    Mr DSonahoe destroyed the sense of community which was a prime motivator for many with the elimination of eBay live, censorship on discussion boards, and limits on member communication.

    It is not a coincidence that eBays fortunes have declined in conjunction with Mr Donahoe’s so called site improvements.

    Donahoes “damn the torpedoes….full speed ahead” approach is accomplishing nothing more than sinking the eBay ship, not righting it.

    It is time the existing management team at eBay was shown the door. Their strategy is a complete failure.

  9. Your plan for fixing eBay is “heavy discounting”? Really?

    You’re aware that eBay does not set the prices for goods sold on its site, right?

  10. Ebay is a mess.

    On top of what was mentioned it is a pain to scroll through some of these listings. They might be 3 or 4 pages long and contain some fine print like over-priced shipping charges or the fact they guy is actually selling you an open-box item even though in the title it says brand new. Or you might find that the seller is selling you a photo of the item instead of the actual item.

    Then Ebay jacked around with where your auction appears in the listings. By default, the bigger sellers have their items appear first in the listings. Your auction might be ending, but it might 20th down on the 1st page while auctions that aren’t ending for another 30 minutes might be listed first. Congrats you pissed off every small seller on your site.

    Then it is a pain to search for something. You’ll get endless lists of knock-off products or unrelated merchandise. And you’ll have to click on each listing to see if the seller’s feedback. And again search the fine print.

    If you list something and the buyer wins the auction, but decides not to pay you have to jump through a few hoops to get your ebay fees back.

    And to list something you have to put in a title and description and make sure all your buttons etc are in order.

    And you have to go to 2 sites – Paypal and Ebay and pay 2 different sets of fees.

    Amazon is pretty much the opposite. Takes a minute to list something. It is free. You’re told immediately how much money you’ll get and how much Amazon gets. When someone buys your item, you ship and their credit card is charged. Every week Amazon dumps the money into account. All automatic and transparent.

    If you don’t end up shipping something then Amazon automatically gives you back their fees. It it was easy to cancel an item too.

    Ebay is a pain in comparison.

    The only thing I wish Amazon had already was the ability to automatically print out shipping labels. IF they made that one click it would be perfect.

    Ebay will remain a place to go for some items. Amazon doesn’t do one of a kind stuff afaik. And sometimes an auction format can be the way to go, less fees for that too. But it is pretty much Amazon for me.

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