eBay is in the middle of an identity crisis in eCommerce. While the company is profitable and even adding users, it seems to have become lost in the U.S. eCommerce landscape.
READ MORE: eBay Surprises with 2018 Q3 Earnings Beat
Amazon is dominating eCommerce. Walmart and Target are throwing huge sums of money at eCommerce to claim their slice of the market.
But eBay, an early pioneer in eCommerce now appears to have only 0.8 percent of the U.S. eCommerce market, according to a report from ISISWorld.
Marketplace Neglected and Mismanaged
After eBay purchased PayPal in 2002, it seems over the next decade PayPal became the more important of the two main businesses entities.
The main marketplace business was plagued with confusing, irrational, and poorly implemented seller policy changes.
There is no question that eBay needed to move to a fixed-price model. But it seems they did the transition from an auction model with little regard to the millions of listings and hundreds of thousands of sellers that successfully sold on the platform using auctions.
And then there was this apparent overreliance on eBay Motors for revenue as at one time eBay Motors was one of the biggest forces in online automotive sales. Today, try to find any mention of eBay Motors in an earnings call…
While eBay kept mismanaging the rest of the marketplace, Amazon grew its core business and hugely expanded third-party seller opportunities.
The same ISISWorld report estimates that Amazon’s U.S. eCommerce market share is now over 45 times of eBay.
But despite all the problems, many eBay sellers stayed with the platform even if they went on Internet forums and Facebook groups complaining loudly about the platform’s issues.
With all its flaws, it was still a viable platform for many sellers and some even grew from small sellers to multi-million Dollar businesses.
The Amazonification of eBay
After eBay split from PayPal and Devin Wenig took charge of the marketplace, he and his team implemented a new strategy that some have called the “Amazonification of eBay.”
Moving to align fixed-price listings to be more competitive with Amazon, Walmart, and Target in user expectations and experience is the overall correct strategy.
But again, it seems the company is neglecting the interests of existing sellers, especially smaller sellers that cannot afford some of the changes.
And this time, there also appears to be buyer friction in transitioning to the changes as confirmed by Wenig himself during this week’s earnings call.
“…our existing buyer base has been slower to adapt to these changes. This has limited our ability to scale some new experiences…”
As messy as the transition from auction to fixed-price was for eBay, it brought a new buyer to the marketplace that didn’t want to deal with auctions. Fixed-price was a clear growth opportunity for eBay as more consumers were going online to purchase products.
That is not the case today as most consumers already shop online. eBay is fighting to attract consumers that have pre-existing expectations for eCommerce.
And to make matters worse, Wenig now says eBay has a demand problem. In other words, there are more buyers looking for products than there are sellers offering them.
“If anything, this has been more of a demand side issue than a supply side issue over the last year. It’s been the constraint on faster growth. There’s been more demand side than supply side.”
Choppy Waters Ahead
During a time when the U.S. economy is very strong, many other major eCommerce companies are growing at or near record pace, eBay seems flat.
Wenig insists the company should not warehouse products, “The one thing I don’t think we need to do is deploy large amounts of capital to build the warehouse strategy.”
Yet, small sellers can ship products to Amazon FBA and have their orders fulfilled for nearly the same cost as eBay’s final value fees.
How small business sellers are supposed to stay in business when they have to pay final value fees and rising shipping costs seems to be an issue that Wenig & Company are flat-out ignoring.
Wenig seems to be very happy with more brands and authorized resellers coming to the platform, “…in the last couple of weeks, we rolled out a new direct from brand, direct from authorized reseller experience that you can see on the Marketplace. And the number of brands continues to grow because brands want choice.”
But those brands and sellers are typically contractually mandated to comply with pricing policies that forbid them to undercut retailers.
Therefore, just like brand owned outlet stores sell discontinued products to monetize excess inventory, many brands coming to eBay are using eBay for the exact same reason.
All one has to do is compare the offered listings to products sold in outlet stores and it becomes very obvious that this is the case.
Is this eBay Wenig wants? An eCommerce version of an Outlet Mall?
Crossroads – Fulfillment The Answer?
eBay is again at a crossroad in its existence. How does the company keep existing buyers and sellers happy while it is transitioning to an eCommerce concept more like Amazon, Walmart, and others?
If that is truly the end goal, it seems the only way to keep small sellers on the marketplace is to introduce a fulfillment network operation. eBay is doing that in Australia to compete against Amazon, why not offer the same service in the U.S.?
Or another option is to split the marketplace into two. One that focuses on auctions and micro sellers with relaxed shipping requirements, and other that fully implements the catalog based shopping experience eBay is slowly introducing.
By itself, the “Amazonification” of eBay is not a wrong business strategy, it again seems there is an implementation problem.
With the share price down, sales and user growth anemic, the current strategy appears to be flawed.
Maybe it’s time for some radical thinking that can accomplish both goals, keep smaller sellers happy and bring new brands and larger sellers to the platform.
What do you think? Please use the comments section below or head over to our Facebook Group for Small Business Sellers and interact with other small business owners.