Is eBay's strategy working?
In previous posts on this blog and in the press, I'm on the record pointing out many eBay issues that we see with DSRs, BestMatch/Finding, fraud, eBay's overall strategy, how they treat sellers, etc. Like everyone in the ecosystem I am very concerned about the future of eBay.
Yesterday, we saw an interesting datapoint I wanted to share. Now it's one datapoint and I realize that, but it is a significant datapoint and could be an early signal that eBay's changes are working.
eBay: A mile wide and an inch deep.
For 8yrs+, ChannelAdvisor has been helping sellers of all sizes on eBay and we quickly learned that the eBay sweet-spot for sellers of any size is for wide (lots of SKUs), but not deep (lots of quantity of a single item). Back in the day (2001-2007), we worked with eBay to bring some manufacturers and retailers on the site and also with larger powersellers to test the depth of the platform. We've had IBM sell hundreds of laptops, Motorola sell hundreds of handsets, and shoe sellers sell hundreds of great-priced shoes, etc. While that sounds interesting, it's usually just a blip out of the total inventory available.
In fact most eBay sellers of scale ($2m/yr+) have to run a wholesale business as they buy in such large lots, they can only sell a small % on eBay so they end up wholesaling the rest. Large manufacturers and retailers turn to 'jobbers' or liquidators to move volume. Some of that product comes to eBay, but the bulk doesn't so there's a huge opportunity GMV out there of 'deep sku discounts'.
Companies like Overstock and smartbargains and liquidation.com fill some of the gaps there as well.
In retailer slang, it became well known that eBay is a mile wide and an inch deep.
Houston, we have a problem?!
Ok, back to today (December 12, 2008). 24x7x365 at ChannelAdvisor we have 2-3 people on-call watching our production systems. During the holidays we effectively double/triple that staff. Aside from the obvious benefits from doing this, we are also able to see unusual trends and monitor them and react if needed.
Last night around 6pm (start of ecomm prime-time), we started getting some massiver alerts from our systems that there was some unusual volume. One of our folks dug in and figured out what it was. We had a single eBay listing that was selling at a rate of one every 5-7 seconds on average, but at peak we were seeing several per second.
The system was keeping up, but it was actually causing some delays in the eBay servers (we were able to spread this around and avoid any latency).
eBay - no longer an inch deep?
It turns out that we have a customer, webbestdeals, that had an item selected by eBay for their new deal of the day program (you can read more about it here - clear your cookies if you don't see it). The item is a Logitech Harmony Advanced remote contorl - these are pretty popular and the low price on the internet is $40-50. This seller has it with free shipping for $29.99 - a SICK DEAL! (In fact, I believe the listing was hit on many of the popular sickdeal/fatwallet type sites as well).
As of this writing they've sold over 6000 of these and are on pace to hit 9-10k easily. At 6000 by $30 that's a whopping $180k in a listing. Sure there are cars and stuff that have achieved that, but this is 6000, $30 transactions in a 24hr period. click on 'purchases' if you don't believe me!
So while this is one datapoint, it is interesting to think about the implications. As we enter this tough economic climate, I'm sure there will be a LOT of inventory that needs to be liquidated. Historically a small % of this has made it to eBay. Imagine if eBay could take this model and scale it. There could be some pretty big opportunities out there with sellers of any size (webbestdeals is titanium PS, but not a 'diamond'/brand) that could bring some deep gmv to the 'new, deeper, eBay.'
A word of caution to my Wall St. friends
This reminded me that many of the analysts on Wall St. still try to calculate what's going to happen at eBay based on listings data. They frequently go to the browse all category page and count the listings. Then they look at completed listings to get an idea of conversions. In most of these listings historically the quantity is 1 or close it (dutch auctions, fp7 and others allow multi-quantity listings, but they were rare).
Well FP30 totally ruins that model. First of all you now have lots of 30-day listings out there with more and more quantity 'hidden' behind them. Take the example above. That would have probably been 9000 listings, now it's one listing, quant=9000.
Also, the conversion data is all wacky now too. The reason why is the fp30 doesn't show up in completed listings until it's life is over or it is sold out. So in the above example, you could have 30 days (you wouldn't 'see' until jan) before this listing shows in completed listings. Also, it only shows as 'one sold completed item' in completed search.
To see each transaction, you'd have to dig into the listing and get into 'completed sales'.
The bottom line is eBay is driving FP30 adoption HARD by increasing the mix of fp30 in search results (50% in most cases) and thus there are a material number of fp30's out there with a material quantity behind them and the old listing-count scheme is largely blind to all this activity.
In conclusion...
Yes it's one item and one datapoint, but I have to say I'm surprised and impressed that we're finally seeing eBay address the 'depth' problem. eBay Strategies readers, what are your thoughts? One-time anomoly, glimmer of hope, turnaround is working or rearranging deckchairs on the Titanic?
SeekingAlpha disclosure: I am long google and amazon.
