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.

Comments

[Ebay_Employee]

There is a saying that if fish starts spoiling, it spoils from the head. You can see this live example at eBay.

eBay established its India development center (IDC) in 2008. From its inception, it was known as pay master who is providing lots of comfort to its employee. But now the situation is totally changed. eBay IDC management is so bad that eBay is the worst company to work for. IDC managers are just behaving like a standard 10th pass managers who worked for some construction company and got appointed for eBay. One of the classic example is the manager from selling team called Neema Nitesh.

eBay management is also not only blind, but management is dump and deaf also. eBay management is totally handicapped.

I strongly recommend everyone not to work for eBay and spoil their features. eBay is a stinking company which has spoiled futures of many brilliant engineers.

[e-DUDS.com]

I love this intelligent, insightful blog and am a regular visitor. We at e-DUDS.com also have a daily deal going in the form of a One Day Special. I would love to get some feedback as to how we can improve ourselves for our customers.

[nikki]

deal of the day is malarky

Hello Nikki,

Thank you for shopping at Buy.com.

At Buy.com we strive to provide the widest assortment of high-quality products at the lowest
prices on earth. However, sometimes circumstances beyond our control affect our selection.

We were recently informed that the item listed below from order #44467019
is no longer available from that supplier. Please accept our sincere apologies for this inconvenience.

Your order for this product has been automatically cancelled. If you paid by credit card, you will not be charged. If you paid by another method of payment, for example PayPal or GoogleCheckout, please allow 2 business days to process your refund.

Order #xxxxxxxxxx

sku - 202592346 : description - Plantronics Audio 370 Gaming Headset, 71018-14

If you have any questions, please contact customer support at http://www.buy.com/support.

Sincerely,
Customer Support Team

Please do not reply to this message. It was sent from a notification-only address that cannot accept incoming email. Instead, please contact us via our webform at www.buy.com/support

[Anne]

Terapeak doesn't yet support the new Fixed price format sales data. If a listing doesn't offically end, then you won't see any sales results (meaning, Good Til Cancelled and most FP30 listings won't show up). Example: I have a Good Til' Cancelled listing that contains 300 widgets. If the listing never ends, you won't see that I have sold 260 of them.

Right now, Terapeak is of no use, if the seller you are trying to spy on is using the new Fixed Price format.

[PowersellerSince1997]

I see you didnt post my comment...which does prove what I said to be true...Your part of the problem not the solution....will not even post comment about a disagreement with your statement....3 subscribers to yoru blog will be lost to0day and about 10 more after I email my fellow powersellers. Very SAD!

[PowersellerSince1997]

Scott,

"but this is 6000, $30 transactions in a 24hr period" 100% false statement!

You obviously have made a huge error in addition or you are trying to skew the the numbers for your own personal benefit...I trepeaked (Which ebay bought) the seller webbestdeals and it shows nothing even close to those numbers...Its the difference between throwing a bullet and shooting a bullet...Not only that a dead giveaway is webbestdeals's feedback.

I use to put value in your blog now I consider you part of ebay....Just another big wig skewing numbers for their own personal benefit...I will find my information elsewhere and so will our powerseller group.

Signed,
Powerseller who is not fooled by you or ebay.

[Noah]

Scott,
I am replying to the blog about Ebay user "webbestdeals" and the Logitech Harmony Advanced remote control. Exactly when and were did you get your numbers from? I did a "Terapeak" search on both the item and the seller for the past 90 days only to find that your numbers are very inaccurate. To give you and any Ebay conspiracy theorists of Terapeak the benefit of the doubt I looked through page after page of the said user name's feedback. There was no evidence of such volume of sales(6000 in a twenty four hour period). If you could please clear this discrepancy up for me and other fellow readers, that would be great!

[Mark Chivers]

eBay UK have a similar offer for DOTW - White Digital 7" Photo Frame - Takes SD MMC. The guy has sold an immense amount at £19.99, and is still going. I partly agree with Walter and they probably could have sold them wholesale, but there wouldn't be that amount of buyers and enquirers who now are aware that this company exists. I don't think sellers should just use eBay as a sales channel, but as a great brand awareness tool. Having said that I just wish that eBay respected their sellers the same way as Amazon do !!

[tm steiniger]

I dont know why you think this is so great Scot? It is easy to sell when your sp is below cost. If I priced my products at below cost our sales would soar 1000%. What is so surprising about that? So who is it good for? Ebay and the buyers. The problem is: I cant make a living with that model and neither can anybody else.

[LOL]

Scott I don’t see the significance?
Countless eBay sellers are way down on sales since Oct, this has been reported countless times over the past 8 weeks; eBay have goofed up with something.

So you pick up on ONE item that’s been in demand due to being HALF normal selling price with FREE p&p and an eBay featured item…this is not rocket science Scott

Lets wait and see what happens after the 10 Jan…>>>>>>>.

[graystonera]

"...could be an early signal that eBay's changes are working"???

You've got a SERIOUSLY flawed analogy there, Scott. smartbargains' sell through rate is completely laughable! smartbargains doesn't even qualify as a "Diamond Seller" in ebay's own definition! ebay's been paying Mercent for over 6 months and that's the best Mercents can offer???

The ebay ship is sinking fast and Captain Donahoe IS responsible (along with Whitman and their "Disruptive Innovation" plot).

==========================

Nielsen-Online traffic data is reporting that eBay's page view's are down by 32.61 percent in October year-over year (YoY).

Before you attempt to blame the economy, please note that ebay's major competitor's traffic was ONLY down by 1.13 percent over the same time period.

To see the charts and to learn more from the report, see "eBay vs. ****** Traffic Data, Plus Holiday Shopping Figures", by adding http:// to the following:

www.auctionbytes.com/cab/abn/y08/m12/i11/s01

=========================

excerpts from gigaomdotcom's Dec. 10th article:

How eBay Stopped Being Recession-proof

What’s happened to eBay?

During the previous recession, the company thrived, partly because it was still young and growing, but mostly because it offered a place for some people to raise a few bucks quick by selling off their stuff and for others to find bargains that were often better than Amazon — or anywhere else, for that matter.

Things have reversed. The performance of the Nasdaq is once again abysmal, but it’s still doing better then eBay.

the first week of December, the heart of both holiday shopping and hard times, online traffic was up 9 percent at major online retail sites overall , according to comScore. Amazon’s traffic rose 10 percent and Apple’s surged 29 percent. But eBay’s traffic fell 9 percent.

The shift is a direct result of eBay CEO John Donahoe’s strategy to make eBay more friendly for shoppers. Over the past year, eBay has de-emphasized auctions and put more focus on “buy-it-now,” fixed-price sales.

By instituting a series of dramatic changes in policies and fees, eBay intended to shore up sales. Instead, it may have blunted its unique edge in online auctions and plunged headlong into another market where competition is much more intense. In grooming eBay to be more like Amazon’s merchants, Donahoe has created a competitor, but one that is growing more slowly. Indeed, analysts are starting to question the wisdom of the move. This morning, one downgraded eBay while another cut earnings estimate for the year, noting that the transition to fixed prices from auctions is being hurt by the recession.

================

to read the entire article, search for "How eBay Stopped Being Recession-proof"

[Anne]

It has always been very easy to move large quantities of commodity items on ebay-if you sell your goods for practically nothing. The lowest price gets the sale, no matter how bad the seller's feedback or DSRs are, it's a painful truth about ebay.

The question for sellers today is: does the low margin, high volume, Costco style model work anymore on ebay? Ebay fees/related overhead are all higher, sellers can't gauge for shipping anymore, and the ebay customer is more high maintanence than ever before. I suspect lots of longtime ebay sellers (like all the media guys) are already operating at a permanent net loss-if they ever elected to shut their business down, in effect, they would have to declare bankruptcy just to stop.

In the end, if webbestdeals, actually made any NET profits on the deal and are truly satisfied with the results, than this was meaningful to them. My experience has been that ebay today is only a last resort even for liquidation inventory. For many liquidators, Craigslist works so much better.

[pwb]

Ebay should have bought Woot a long time ago.

Walter, why so much pessimism?

Scot, CA checkout is struggling.

[Walter Tornopilsky]

The seller priced the item too low. Lots of money left on the table. Is eBay subsidizing that product to drive traffic to the site? No, then what does the seller gain from selling it for such a low price? They probably could have sold those in bulk at that price. New customer acquisition? Overrated. Overvalued. These buyers are bottom feeders. They won't be loyal to the seller.

No point in analyzing this much on the eBay side. They're still feeling they're way around. They clearly need to make more pricing changes as the current jumbled structure is confusing at best. They're just waiting until after Christmas to make the changes they must know they need to make.

[Randy Smythe]

Scot,

I've been following the Daily Deal for awhile and some deals get far more traction than others. Unfortunately the vast majority of Daily Deals are going to Buy.com and sellers are getting frozen out of the Daily Deal program. At least several that I've spoken with have been.

In order to get this kind of velocity the deal has to be "sick" as you put it. So it may only benefit the seller who is liquidating or as a traffic generator to their other listings. From what I can see in the purchase history though, it looks like a lot of the purchases are being made by sellers as a sourcing option. You will probably see a lot of that product on Amazon in a couple of weeks.

It does prove, what many of us have said all along, eBay is the place for liquidation, cost recovery, surplus, long-tail product or merchandising gimmicks and loss-leaders on New product.

My vote: It's just one data point that proves eBay should be eBay.