/ 20 August 2008

eBay changes aim for fewer critics and more sellers

eBay will unveil sweeping changes on Wednesday to encourage more fixed-price sellers as part of a wider attempt to transform the business from global car boot sale to worldwide shopping mall.

A new fee structure for fixed-price items and increased financial protection for buyers are part of an attempt to attract shoppers for everyday goods as well as bargain hunters who enjoy the auctions for which it is better known.

The new strategy will also be seen as an attempt to answer Wall Street concerns about its growth prospects and a response to criticism from the loyal community of millions of buyers and sellers who have helped drive its growth and build its brand.

Selling $55-billion worth of goods a year globally, eBay has been lauded as one of the great success stories of the internet age. But it has endured a rocky year.

When Louis Vuitton won a high-profile French court case over fake goods, analysts questioned its capacity for growth and some of its hitherto loyal band of sellers staged an open revolt over changes to its fee structure.

As it faces a wave of renewed competition from online competitors like Amazon and so-called ”bricks and clicks” players such as Tesco combining shops and the internet, eBay UK will unveil several changes it says are designed to help those entrepreneurs make the most of fixed-price sales.

Upfront fees for listing items will be slashed and the fee for a successful sale will be increased in an effort to get buyers to list a wider range of goods and increase choice. Sellers will receive discounts on those fees and better search listings according to the volume of sales and quality of service.

Though critics fear the moves will benefit the big retail partners that eBay is looking to attract at the expense of smaller traders, eBay executives insist that both can profitably co-exist.

And in an effort to counter persistent fears that customers risk being ripped off by unscrupulous sellers, eBay will raise the protection for anyone paying for goods through its own PayPal system from $920 to $55 000.

It will highlight the fact that 43% of its global sales are at a fixed price — a figure that has grown by 60% over the past six years and is quickly catching the revenues generated by the auctions.

Though the changes may appear inconsequential to non-users of the site, for its 15-million monthly visitors — and in particular to the 178 000 bedroom entrepreneurs who have been able to quit their jobs to trade on eBay full time — they are crucial.

”We’ve been on this path for the last few years,” said Clare Gilmartin, director of marketplaces for eBay in the UK. ”There’s no doubt this year has seen some very, very bold changes — necessarily so and entirely reflective of what our buyers and sellers want.”

She said that the shift from auction sales to fixed price was an indication of how online retailing had matured, growing from 1% to 17% of the overall market in the nine years since eBay launched in Britain. Auctions would remain popular for collectables and one-off sales, she said, but that in many product categories people preferred to buy at the click of a mouse.

”I don’t think anything can surpass eBay in terms of choice. But e-commerce is now mainstream. We see our competitive set as a broad one — anywhere where a buyer can buy stuff online. That might be Amazon or the more traditional bricks and clicks. But the big advantage we have is choice — mums sitting alongside entrepreneurs, sitting alongside big retailers.”

Bigger retailers
Dan Lumb, head of e-commerce at Schuh, has built an eBay business selling 150 000 pairs of shoes a year as it has used the site to sell discounted stock. He said it was ”inevitable” that small business users would feel ”a bit disgruntled” at bigger retailers moving on to the site.

But he added: ”I think there’s room for everybody. At the end of the day, having big brands on there helps legitimise eBay as a marketplace. Having big retailers on there makes it more exciting as a buying experience.”

EBay has positioned itself as a consumer champion, uniting buyers and sellers and allowing small businesses to compete with big names. The revolt in the US this year risked damaging that image.

It came after Meg Whitman, the chief executive who had overseen its phenomenal growth for a decade, made way in January for John Donahoe to give the company ”a fresh pair of eyes”. Though her tenure was generally considered a huge success, she left to a chorus of criticism after admitting that the company seriously overpaid for the internet telephony company Skype, acquired for $2,6-billion in October 2005.

Last month, a court ordered eBay to pay Louis Vuitton $61-million over sales of fake handbags and perfume. EBay is challenging the ruling and was recently cheered by victories over Tiffany and L’Oréal, which were trying to make the website liable for counterfeit goods sold through the site.

Gilmartin predicted the changes would kickstart another wave of growth for the site, noting a surge in demand for clothing, homewares and garden items in recent years.

”We hope to see significant increase in the choice our sellers give to buyers,” she said. ”If you are a buyer and searching on eBay, you’ll have far more chance of finding what you are looking for. In a credit crunch environment, it’s far easier to shop around online for a bargain than it is offline.”

Case study: The trader
When Chris Dawson was made redundant from his job in IT sales, he decided to tide himself over by selling furniture for a friend through eBay. Four and a half years later, he has yet to return to work.

He is one of 178 000 people making their primary or secondary living from the site, running a computer accessories business with sales of more than $11 000 a month. As co-founder of the blog TameBay, he also has a unique insight into the often vociferous community of small sellers that have helped eBay expand into a $60-billion global business but periodically threaten its future. He said some of the smaller sellers, particularly those who may be reliant on the site to meet mortgage payments or other outgoings, tended to be among the most resistant to change.

”Any change to the site that benefits one seller automatically disadvantages others. The sellers who are disadvantaged will always shout the loudest,” he said.

Theoretically, he said, lower upfront fees should help small businesses because they can offer a wider range of stock. But they could also favour bigger retailers because cheaper fees will allow them simply to list their entire catalogue.

Dawson said eBay had been unsympathetic to the effects of changes to its fee structure and feedback system on smaller sellers but credited it with becoming more open in the past year. ”EBay has realised there is quite a lot of fear among sellers,” he said. ”They are realising that sellers are eBay customers too and listening to their customers.”

He said some of eBay’s longest-serving users wore rose-tinted spectacles. ”People forget the internet has changed. When eBay started out, a lot was taken on trust and people were sending envelopes stuffed with dollars across the Atlantic. Now, with instant payments, buyers are expecting better service and almost instant delivery.”

But he said the auction site also had to raise its game to meet new challengers. ”If eBay doesn’t take steps to ensure its sellers are providing the right level of service and customer satisfaction, it will fail. Buyers will go to Amazon or Argos instead. Amazon is doing really well and sellers are flocking to Amazon. You can buy almost anything on eBay. The challenge is to make sure you can carry on doing that and maintain a good level of service. It’s a hard tightrope to walk.” – guardian.co.uk