eBay has been struggling over the last year or so, as online consumers tire of the auction format, and are increasingly turning to fixed-price retailers such as Amazon.com. Not surprisingly, the company has decided to change its business model and shift more toward fixed-price listings, and away from auction sales.
As part of their new strategy, eBay has signed a deal with online retailer Buy.com, which will allow the company to sell books, electronics and other items on eBay without paying the usual seller fees. The new deal has sparked outrage among eBay sellers, many of whom rely on the site and earn a full-time living as eBay sellers.
eBay’s new CEO, John Donahoe, instigated the buy.com deal in an attempt to increase the company’s profitability after several quarters of lackluster performance. The deal will add more than 5 million fixed price listings to eBay, from electronic items to books, CDs and DVDs.
Smaller eBay sellers are outraged by the deal. Large retailers such as Buy.com are able to offer perks such as free shipping which smaller sellers cannot hope to compete with. eBay seems to be sending a clear signal that the company is moving toward large retail outlets, and away from the small home-based sellers that made the site what it is today.
As part of the deal with Buy.com, eBay has initiated a new “Diamond” seller status, a distinction which allows sellers to negotiate their own fee arrangements with eBay directly. While Buy.com is the first seller on eBay to be awarded the Diamond status, industry analysts speculate that it will certainly not be the last, as the company is actively courting large online retailers to round out its inventory and increase sales.
eBay was originally established as a “level playing field,” on which small home-based sellers could compete with the biggest names in retail side by side. By changing their business model so dramatically, and making a “special arrangement” with Buy.com, eBay is effectively throwing its small sellers under the bus.
eBay power user blogs and forums are brimming with anger and disbelief over the Buy.com deal. Many power users are claiming their sales have dropped by as much as 75% since the appearance of Buy.com items on eBay. Understandably, most of these sellers feel betrayed by eBay for turning its back on the “level playing field” ideal, and giving special deals to large retailers.
For many years, eBay resisted making such special arrangements, claiming that it would undermine their status as the world’s online auction place. But new CEO John Donahoe appears to have different plans in mind for eBay — a plan that could effectively wipe out many of the small “mom-and-pop” sellers that made the company a success in the first place.
Ebay’s Q2 Quarterly Earnings Call was yesterday and they totally played down the Buy.com. I think overall it will realy hurt the company among its main supporters. I think what they are trying to do is pretty clear though. They are teaming up with Amazon’s main competitor to true to fight Amazon head to head, while moving closer to Amazon’s business model. You can read the entire transcript of the conference call at http://www.seekingalpha.com by clicking below:
http://seekingalpha.com/article/85345-ebay-q2-2008-earnings-call-transcript?page=-1&find=buy.com
Comment by Cheryl — July 17, 2008 @ 2:08 am