Ebay Inc. Snatching Failure from the Jaws of Success?

Just a couple of days ago I received this email from eBay Inc.

To personalise your listings, create your own brand and keep buyers coming back for more, why not set up your own eBay Shop?

It's easy and takes only minutes. Once you're set up you can develop your brand and send your customers your own promotional leaflets and emails to build customer loyalty and encourage repeat purchases.

Everyone loves a bargain, and with our new Markdown Manager feature, you'll now be able to offer discounts to your buyers and clearly mark your items as being on sale.

Start building your brand now!

Normally such an email would get deleted without a moments thought but, this time, I reflected that it was almost exactly a year to the day since I closed my eBay store and started to consider whether the decision I made then was right.

Being a moderator at the Pheebay auction forums I decided to post a reply to eBays invitation there. It read:

Dear eBay,

Thank you for inviting me to open a store on your awesome site.

It is a while since I traded via an eBay Store. You probably don't remember but I did indeed trade via a busy Store until July 2006 when my complete business model went out of the window. This was due in part to excessive fee increases and also due to the fact that hardly anyone was going to view my store listings anymore.

I am a well known idiot in my locality which may be the motivation for your email. I have been known to swap prime high street real estate for a secondary position in a ghost town before and you probably expect me to do it again.

However it has recently dawned on me that to pay you £6 (US$12) or so a month before paying any trading fees, the idea has to be to get your items seen and then purchased by potential customers. I know this doesn't bother you as much as it does me, as fancy search algorithms where you decide what's best for the customer are far more important, but I'd rather remain solvent this year if you don't mind.

However, that said, please rest assured that when I have my next episode of insanity I will seriously consider your invite. This may coincide with me winning the lottery and not giving a toss about paying bills next month.

Thank you once again for your flattering invite. You are the undisputed kings of innovation in the crazy department.

Okay, I accept my spoof response may be a little over the top but, by way of explanation, let's examine why I felt motivated to mock eBay's latest stores marketing.

To anyone unaware, the storm of protest 12 months ago was almost entirely due to eBay increasing the trading fees paid by their store owners dramatically while, at the same time, greatly reducing the visibility of store inventory to browsing eBay buyers. It became dubbed as eBay's 'Hike & Hide' policy.

At the time many people complained that the move was not simply a slap in the face to many thousands of store owners they had actively recruited but also a harsh demonstation of the influence eBay excercise on the results returned to buyers by eBay's own search engine.

Management of eBay, even at the very highest levels, maintained this hike and hide policy was justified to 'rebalance' their marketplace and bring back the 'magic' of eBay to buyers by getting a lot of listings to switch from stores to their core auction and buy it now formats. But were these claims justified? Wall Street predictably welcomed news of fee increases and seemed almost oblivious to the wave of protest and disgust it created among some of the auction giants longest standing and most loyal fee paying users.

My first concern looking back is that, since this episode, eBay core (auction adn BIN) listings have actually declined noticeably on their flagship eBay.com site despite the expectation of a huge inventory influx from their now overpriced stores.

Next I was amazed to see how much influence regular use of cheap listing days were having in propping up these sagging figures. It appears the listing decline would have shown up more dramatically without this regular heavy discounting.

Looking back a very obvious question begs. As eBay have unusually passed over any major fee increases so far this year (in fact short term discounts are very much in vogue it seems), it appears they realise they got it badly wrong in 2006. But why is nobody asking the management to account for this? Why hasn't the 'magic' returned? Why didn't the switch from store to core result in higher listings? Why are the earnings from increased fees being negated by heavy discounting? It seems analysts have very short memories and appear all too willing to believe anything they are spun by eBay execs today and completely forget what they heard yesterday.

Now many readers may cite the last couple of quarters financial statements as evidence that eBay is far from sick but I think they need to look a little closer. Paypal has performed brilliantly without a doubt. Skype has started to produce revenue. Moves to acquire better tax treatment overseas have contributed and the weakness of the US$ has had a massive effect on eBay earnings of late. All good, albeit dangerously short-term, news.

But once the tax breaks have worked their way through the system and the dollar begins to regain a little strength, the websites will need to perform somewhat better to maintain anywhere near the kind of apparent performance they've shown on paper lately.

It is my considered belief that eBay is a brilliant business but badly managed. While people can point to improving numbers and gloss over the factors behind them for so long, it is clear to me that eBay is becoming too diverse, directionless and becoming potentially at risk from better, more focused competition in many of their markets.

Does anyone really know how to spell 'Kijiji' let alone consider using it in preference to Craigs List? Do you know anyone who actually pays much real cash to Skype each month? Remember eBay Express? Bought a book on Half.com rather than Amazon lately?

I believe it is time for a fundamental management shake up at eBay that demands 'back to basics'. Forget about the constant dillution of the eBay brand and concentrate what people want rather than what 'consultants, experts and advisors' say people want.

The eBay we all know and love HAS BEEN a success. But a recent report from the Telecoms Watchdog in the UK informs me that internet user numbers have grown by over 150% in the past five years and the time spent online by these users has also more than doubled. Given that growth in potential I have to ask whether eBay really has been as successful as it could have, or should have been?

Returning to the original email eBay recently sent me. Did you notice one of the main suggestions was for sellers to mark down their prices on eBay? Seems discounting is all the rage in San Jose right now. But while considering squeezing your margins even more on your eBay sales do remember this saying I learned long ago; Turnover is vanity, profit is sanity.

We discuss eBay and the myriad of alternative trading venues regularly at the Pheebay Auction Forums. If you disagree with my thoughts, or have an alterntive view to put forward, then please drop in and let us know.