eBay power sellers: Amazon is kicking eBay's tail

eBay power sellers: Amazon is kicking eBay's tail

Summary: Three eBay power sellers are painting a mixed picture at best for the auction site and note that the recession and Amazon are thumping the company. These power sellers, Skip McGrath, an eBay Gold PowerSeller; Steve Lindhorst is a former eBay University instructor; and Ron Saxton, whose Image Warehouse, is an eBay PowerSeller, were gathered by Bernstein analyst Jeffrey Lindsay for a conference call.

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Three eBay power sellers are painting a mixed picture at best for the auction site and note that the recession and Amazon are thumping the company. 

These power sellers, Skip McGrath, an eBay Gold PowerSeller; Steve Lindhorst is a former eBay University instructor; and Ron Saxton, whose Image Warehouse, is an eBay PowerSeller, were gathered by Bernstein analyst Jeffrey Lindsay for a conference call. 

Lindhorst and McGrath use both eBay and Amazon and Saxton uses eBay, Amazon and Overstock. Here is Lindsay's recap of the conference call and the key takeaways:

eBay sellers are taking a hit from the recession. These eBay users say sales were down 12 percent to 20 percent from a year ago. Saxton, who resells refilled ink cartridges, said sales were up 15 percent. However, baby products and anything do-it-yourself sell well. Apparently a crappy economy has led to a baby boom of sorts in the U.S., said McGrath. Stray hunch: People are cutting back on cable so are looking for something to do.

Amazon's third party platform performs better. Lindsay wrote:

Although they found Amazon's fee load is typically higher than eBay's – 15% versus 12% on eBay, they preferred to do business on Amazon because of its higher degree of automation, its low-touch sales model which avoided having to email back and forth with customers, and access to Amazon's fulfillment services.  They noted that eBay could match all of these advantages should it to choose to do so, using fulfillment services from third party companies if necessary.

Saxton said:

I just started on Amazon back in July, and I’ve experienced 22% minimum growth  every month since. The potential with Amazon right now for me is much, much bigger than it is with eBay, and I’ve been with eBay - this will be my 12th year, actually.

The big question: Why doesn't eBay match Amazon's features? My hunch: eBay can't match Amazon's information systems, which have automated out a lot of the e-commerce hassles. Meanwhile, Saxton noted that eBay buyers can be high maintenance. Simply put, haggling is out. Automation is in. 

McGrath hones in on the communication issues on eBay as a seller:

The products I  sell on Amazon are in the $200 to $300 range. And I find, as far as treatment, how Amazon treats me? Fine. I mean I’ve never had any issues or problems with Amazon. I had one return once, and it went smoothly and everybody was happy. Whereas eBay can be a challenge. You know, things - just all the stuff that goes on with sellers and the communication. I think that’s the big thing for the seller, is that Amazon requires so much less work and communication. eBay - the thing on eBay [is] you’ve got to keep your feedback up and your DSRs [Detailed Seller Ratings] up. If you’re going to keep your DSRs high to get the fee discounts and get the search placement, then you need to do very high-touch customer service. There’s just two of us in our business, just my wife and I, and my wife does all the customer service. But she works at it; she’s on that computer talking to people from seven in the morning until seven at night to keep the business going. Whereas on Amazon, we get an order, it comes into my computer, I forward it to her, she enters it on the website of the manufacturer, the manufacturer ships it, and I’m done. So it’s real simple.

eBay's strategy to sign up discounters and liquidators will fail. The three powersellers say that eBay's secondary market strategy is designed to boost volume, but is going to hurt revenue and margin growth. Why? There will be more listings, lower sell-through and the clutter will alienate current eBay sellers. 

All of that said, eBay has made some big improvements (that few have noticed). The powersellers say that eBay has cut fraud rates, is leveraging PayPal well and seller reviews are ditching ineffective participants in the market. Simply put, eBay has improved the customer experience, but needs to put some marketing heft behind the improvements. 

Add it up and eBay still has a lot of improvement ahead of it. Lindsay sums up:

eBay could do much better in several key areas: (a) search was still weak, (b) the site still had a "flea market" look and feel to it; (c) eBay could/should introduce labor-saving automation such as UPC readers to simplify item listings as Amazon does already; (d) eBay should separate the auction business for unique one-off items and collectibles) from the retail business (quantities of multiple items) they felt that eBay Express had been promising but management failed on execution and publicity – they think a similar approach would likely succeed if implemented more thoughtfully; (e) eBay should offer fulfillment services through third parties such as Shipwire.com and even Amazon's FBA; (f) cross-border sales had been suppressed and this was a mistake; (g) outsourcing keywords to Microsoft had been a mistake and was generating far less traffic than when keywords were bought primarily from Google; (h) finally the CEO, John Donahoe, could do more to "woo" the seller community who found him somewhat cold and analytical.

That's a hefty excerpt but I included it verbatim to show that Lindsay's improvement list made it all the way to the letter "h." Bottom line: eBay is highly unlikely to close the Amazon gap. Amazon isn't the type of company that will stand still and eBay is improving at a slower pace. By time eBay matches Amazon the e-tailing giant will have rolled out a bevy of new improvements. 

What should eBay do? Lindsay says that eBay should ditch its growth plans, cut costs and revert to what it does best---auctions. Sure, eBay would be a slow growth company, but it'll be a cash cow that can spin off dough to shareholders. 

Can eBay close its Amazon gap?

Topics: Amazon, E-Commerce, Enterprise Software

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9 comments
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  • eBay is paying for its arrogance

    I've been on eBay for over 10 years. I use it mostly to sell off older electronic and photo gear after I upgrade. The last few times, I used Amazon instead.

    1) eBay has been nickel-and-diming sellers for a long time now, just because they can. Monopoly tactics only last so long before they cause a backlash.

    2) The decision to ban negative feedback from sellers means buyers' feedback is essentially useless as a gauge of trustworthiness.

    3) The experience on Amazon is much more streamlined for sellers, not just buyers. It takes much less time to list an item as Amazon already has detailed product descriptions.

    4) Amazon offers seamlessly integrated listings and payments. You don't have to worry about fraud as much as on eBay because you are paid by Amazon themselves.

    5) Your items are offered as a used option to people considering a new purchase. The high "foot traffic" means higher exposure.

    6) Amazon listings do not incur a charge, they only charge you when you successfully sell. What's more, Amazon listings don't expire until 30 days.

    7) eBay is still the place to go for unusual items, e.g. 1960s classic film cameras. Most of the time, Amazon doesn't even have listings for them.

    eBay's futile attempt to chase new item sales will prove their undoing. They had a highly profitable niche as the world's virtual garage sale. eBay simply does not offer as good user experience for buyers as any online retailer, let alone Amazon. Their design is crude and amateurish, and the prevalence of fraud does not make for a stress-free shopping experience. At the same time, the changes they made in the last 5 years have durably alienated occasional sellers such as myself (admittedly in the very long tail).

    For a volume seller, it makes much more sense to use a professional e-commerce platform than a flea-bitten one, or even roll your own with software like Magento.

    The PayPal business is a good one, but the future I see for eBay is its commerce business shrinking down to cover only collectibles and other unusual items.
    fazalmajid
    • Great summary!

      You pretty much nailed them all.
      ejhonda
  • RE: eBay power sellers: Amazon is kicking eBay's tail

    I used to sell a lot on EBAY and made good money, but I no longer regard it as a viable venue. It's simply no longer a practical place for small sellers, sure, most deals work OK, but you just need one bad buyer to give a strong negative and your business is wrecked (Ebay zaps your search placements) and you feel terrible - the selling experience is generally very bad at EBAY. If you're like a liquidatiion world with special deals with ebay itself then it seems to work, but not for the great majority of sellers - of course, flip side, not much of interest to buy there anymore either.
    DLWELD
  • RE: eBay power sellers: Amazon is kicking eBay's tail

    eBay once held the position at the top. then they made some mis-steps and tumbled a little down the mountian. That could have been recovered from but they keep doing back flips off of cliffs and crashing further and further down. This year eBay has decided to compete with Overstock.com who is nowhere near the top. I guess to avoid further failure their plan is to compete with a company that is not in their league, kind of like the LA Lakers playing a JV basketball team. Of course last year ebay decided to compete against Amazon who was smaller than eBay and we all know how that turned out. Maybe next year eBay will want to compete against a home-based e-commerce site. It will be hard for eBay to improve if it keeps looking down for competition.

    http://www.rexxindustrialparts.com
    rexxsales
  • RE: eBay power sellers: Amazon is kicking eBay's tail

    Companies reflect their top management. eBay
    stockholders should remove the incompetent head of
    eBay and revert to what was successful before Donahoe
    was added to management.

    eBay's 'flea market' is the company's strength.
    Amazon doesn't want to become an eBay. eBay can't
    become an Amazon.
    Lexicographer
  • RE: eBay power sellers: Amazon is kicking eBay's tail

    From the article, and the folks you covered, as well as the comments, it seems that eBay's strategy in moving away from "flea market" status has not, and is not working. Instead of being the place buyers go for anything not duplicated 100 times on Amazon (which seems to work well for them and re-sellers of non unique items), they want to be a watered down version of their competitor. While Amazon favors mass merchandise sellers and buyers, eBay was once a unique seller, and that's why it grew. Now, it is copying everyone else, and since Amazon was there first, eBay can't just duplicate and catch up. When you lose your customers (sellers), you lose your business, pretty straight forward, and I don't even have a business school degree, or training at Bain & Co to understand that.
    Rather Russ
    RatherRuss
  • RE: eBay power sellers: Amazon is kicking eBay's tail

    I am simply going to sell outside ebay as much as I can and then when they at some point close my account I will move over to Amazon. I have been with ebay since 1999 and am a power seller but have had it with them and their worthless customer service!
    ALISON SMOCK
  • RE: eBay power sellers: Amazon is kicking eBay's tail

    I've been with ebay since the beginning but i'm really hoping for their demise now. I've just registered with amazon, and am also selling on ebid.net. I don't have a problem with them trying to clean up sellers, but the abandoning of "mom and pop" stores, manipulating search to favor big guns, and absolutely stupid strategy of trying to be amazon/overstock is unforgivable. Had enough, and time to move on to greener pastures.
    accorn
  • RE: eBay power sellers: Amazon is kicking eBay's tail

    I quit eBay because they create a stressful selling environment. Sellers simply cannot control how to run their business only because some unethical competitors can deface their business by leaving negative feedback and there's no recourse whatsoever. eBay would suspend sellers' account without any investigation.

    From a buyer perspective, it's stressful too. After digging thru a mountain of listings only to find that the cheap item comes with a hefty shipping from China or Hong Kong. eBay buying experience has become Pay-n-pray.

    eBay has been actively trying to fix what works well and turn it into a dying elephant. It's just a matter of time, thanks to Donahoe.
    anonymous