Power Sellers Unite

LurkeyLou

A Fool Looks Back / Motley Fool

By Rick Aristotle Munarriz (TMFBreakerRick)
July 22, 2006

I'll trade you a cocker spaniel for a cocky panel
I'm not sure what eBay(Nasdaq: EBAY) was thinking. Just hours after posting mixed results for the June quarter, the only brand that matters in online auctions announced that it was hiking fees for virtual merchants in its eBay Store area.

The email was entitled "Resetting the Balance of the eBay Marketplace," but read on and tell me if eBay is balancing the marketplace or forcing its most active sellers to play seesaw with a sumo wrestler.

Yes, eBay is keeping its core listings in check. It is the fixed, longer-lasting store products that eBay is gunning after in its latest rate hike. The company's idea of "resetting" is to make it more expensive than it has been to put up items under the store format and convince active sellers to opt for the more conventional auction platform. Wouldn't the more logical solution have been to lower core listing fees instead?

Hear me out. I'm not some disgruntled citizen of the eBay community. If eBay is able to get away with ratcheting up its fees to the stratosphere, I would be all for it. The problem is that after years of perpetual hikes, patrons are getting fed up with the nickel and dime approach to taking thicker slices of their auction proceeds. The proof was in the report itself.

Over the past year, eBay's marketplace revenue inched 22% higher, even though the gross merchandise value of goods that were exchanged rose by only 18%. That's a pretty troubling sight once you realize that eBay is taking more money out of its auctioneers (relative to final bid prices) than it was a year ago. In other words, eBay may already be pricing itself out of the market as it tempts the elasticity of its pricing. Keep watching the gross merchandise value metric in future quarters. If it continues to grow at this anemic pace, eBay may no longer be a growth stock and it will likely regret inching up rates at a time when it should have been attracting more listings instead.

reference - Free Registration Required: http://www.fool.com/News/mft/2006/mft06072201.htm?ref=foolwatch

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Very, very revealing info: "eBay's marketplace revnue inched 22% higher, even though the gross merchandise value of goods that were exchanged rose by only 18%."

Pipphoe

Boy, this article hit it right on the head. You can squeeze and squeeze as much as you want but there's a breaking point and it seems to be there.

If I remember correctly, haven't a lot of the recent statistics also been towards BIN rather than auction. Certainly sellers don't seem to like auction sites without storefronts -- I know I don't. It's one of the contentions that sellers have with OLA, and it's my major reason why I may leave at the end of my Founding Member period this year.

Sites that buck the trends are not going to make it. You have to be flexible in this business and you have to listen to what the users want. They're your business.

LurkeyLou

Yup, Pipphoe BIN has been out performing auctions for the past two years. I like the MedVed tracker, it's not associated with sellers or venues - it's for investors.

In addition, PayPal is the "method of choice" for moving money online. They have a huge market share, but it's only 25%. Since we know that auction traders prefer PayPal by roughly 90% - this means that no less than 75% of money spent online is non-auction. I pay for hosting and other services through my PayPal account, so that 25% isn't strictly auctions.

When you look at the MedVed tracker and compare the info from a recent interview, the numbers jibe pretty well. BIN at eBay itself stays in the 60% ball park, and PayPal isn't being used in about 75% of online transactions.

Clearly, BIN/stores platform is preferred by over 50% of shoppers at eBay itself, and online in general.

eBay has become much to big for it's britches. If ya' don't cater your customers, someone else will.

Mr. Munarriz's statement "...forcing its most active sellers to play seesaw with a sumo wrestler. " illustrates beautifully Cobb's idea of "Resetting the Balance..."???

MedVed eBay STR & Auction Count Charts (includes historic data):
http://www.medved.net/cgi-bin/cal.exe?SIND

Numbers don't lie. My Uncle always says "If you want to know the truth, follow the money." Putting the numbers together from a variety of sources and coming up with similar info is meaningful. eBay is shoving store owners back to the auctions - even though they gain more sales from BIN's. They're setting up their next move. Where will they squeeze next? They're lining their customers up at auctions. A diversionary tactic?

Pipphoe

This was another interesting mention on the eBay store boards regarding the stock price. Somebody posed one of those hypothetical conversations between Bill and Meg about raising fees and running the stock price of eBay down a bit more so they could get more for their stock buyback next month. Ouch! This would make a lot of sense. After all, a bunch of exces over there sold a bunch of stock last year around the last fee hike, as I recall.

Money doesn't lie. Rhonda is right. Always follow the money. Isn't that what they do on Law & Order all the time? I wish I still did transcripts of SEC hearings -- the ultimate fly on the wall :twisted: Except that, like all the work I do, I can't talk about it with anyone.

2BOYSandTOYS · Joined: 14 Mar 2005 Posts: 10095 Location: Kansas

Thanks for sharing Lurkey - great article and .... obviously summarizes everything we've already pondered and knew...

Cathy - you raise a very good speculative point - when a company does a buy-back, you bet it's too their advantage to have the price lower - and intentional or not, there is no doubt in my mind - it will be watched very, very closely - esp. with all the corporate 'crapola' that's been happening in recent years...

I personally believe and have been also watching data/financial analysis that supports this - the market is losing interest in auctions. As a society, we really (right, wrong or indifferent) have become a 'want it now' 'buy it now' society.

With technology, one can quite quickly and easily do searches and conclude that waiting for an auction to end, and risking 'not getting your price desired' is almost pointless any more - as you can BIN with a total cost of equal or less than the auction end+ s/h...

I think very quickly - you'll see the market kind of go 'ho-hum' - I don't have time to wait, I want it now. And I'll pay another buck/two to have it hear (before the darn auction even ends..)

So - like most large beaurocratic corporates, ebaY is about 2 years late + many millions short of missing the mark. They - IMO - should have segmented their customer platform into stores and auctions. They then should have had each function as SBU(s) Strategic Business Units and influenced and affected the ebb/flow of the market, demand and patterns individually instead of what they've done.

It will be interesting to see what happens in the short run and the long haul - real, real interesting 4 sure... :wink: :wink:

PS - I am glad I am not a stockholder right now...

nopaypal · Joined: 23 Feb 2006 Posts: 2008

Quote: › docWrite("quote") the only brand that matters in online auctions
sheesh! pretty brutal way to put it...i prefer "the only game in town."
:P

envirobay · Joined: 17 Nov 2005 Posts: 624 Location: Boise, Id

nopaypal wrote (View Post): › docWrite("quote")
Quote: › docWrite("quote") the only brand that matters in online auctions
sheesh! pretty brutal way to put it...i prefer "the only game in town."
:P

Brutal but (unfortunately) true.

Hey LL, nice post. Thanks for putting this up. This author did a good job on this report. I love it when I read/watch reports of non-ebay sellers who are ripping them a new one. :)