Auctionless eBay

Posted on June 3, 2008

Once upon a time, you could put most anything up for auction on eBay and feel like it had a pretty good chance to sell. On top of that, for years there was such a feeding frenzy at the online auction site, you could often sell new merchandise for more than it would bring in a retail store.

That’s what happens in an auction environment — people go crazy. Prices go high, and sellers go happy. Once upon a time…

Though eBay has almost a total monopoly on auctions online with around 90 million users, the auction business is not going too well. If you’re on eBay much, you’ve no doubt noticed more and more ‘BuyItNow’ logos popping up. In fact, with the new CEO in place, a turn in direction has taken place for the company.

Since online research for pricing of items is readily available today and many users take advantage of it, the days of good auction prices for new merchandise are gone. Most people are not willing to take the time to bid and monitor retail items in the hopes of saving a few dollars. They prefer to see what the lowest price is and just ‘BuyItNow’ rather than waiting. Since profit margins are slim all over, a vendor has to offer a pretty good price to make a sale on eBay.

It’s pretty obvious when you look at recent quarterly growth figures for Amazon and eBay, that the set price approach works much better. Amazon continues to have great growth rates. If you analyze the eBay numbers, they have good growth also — in the fixed price business, but not on the auction side. They are already emphasizing fixed prices with eBay Express and eBay Stores.

A recent fee restructuring indicates they feel the future is not in auctions, as the new pricing hit the auction side hard and better fees were given to the fixed vendors. Naturally, this met with outrage from the loyal ‘auctioneers’ who had been listing items on eBay, some for as long as 10 years. They feel they have built the business for eBay and then got dumped overboard. A number have left. Those who have built good clientele lists over the years can probably make it on their own, selling through their own websites. Many will simply quit altogether.

Of course, there will continue to be good auction activity in the non-retail, mostly collectibles area. Items that are rare, out of production, or of interest for other reasons will always have a market and a marketplace. I envision eBay spinning off one of the two segments to form a new company that doesn’t hinder the other.