February 23, 2015
Can eBay Get Its Groove Back?

By Cliff Ennico
SucceedingInYourBusiness.com

It's hard to believe that eBay, one of the early Internet pioneers that celebrated its 20th anniversary as a public company last year, is viewed by many today as a stodgy, "late stage" company. But so it seems.

Earlier this year eBay, under pressure from shareholder activist Carl Icahn (we used to call these people "corporate raiders" back in the 1980s), announced it would spin off its profitable PayPal division into a separate company (with a market value of about $40 billion), and either sell off or take public its eBay Enterprise division which provides technology solutions to e-commerce companies.

That will leave what is now called "eBay Marketplace," or what those of us who fell in love with the site in the 1990s called "eBay" - the place where everyday people buy and sell stuff to other everyday people.

It is tough to predict what eBay Marketplace's strategy will be once it's back on its own again. For the past several years, its strategy, if it can be called that, has been to copy Amazon.com's business model as much as possible but without making the capital investments Amazon. Such as, establishing highly automated brick and mortar warehouse and distribution centers in most states. It hasn't worked. Many of the Mom-and-Pop sellers who made eBay a household name 20 years ago are now selling mostly on Amazon and other platforms such as etsy.com.

It will be interesting to see what CEO Devin Wenig will do with eBay Marketplace when all of the dust settles.  It has been suggested, among other options, that he sell the company to Chinese copycat Taobao.com, which currently does not offer an English-language version of its site or distribution within the English-speaking world.

Could eBay Marketplace continue to thrive and grow as an independent company, and get its "groove" back? I think it can. Here are some things for Mr. Wenig to think about before the "escape pod" leaves the mother ship.

Stop Chasing Amazon.  Amazon has done some things right, but at a huge cost. Building brick and mortar warehouse and distribution centers in all 50 states is costing them a bloody fortune, and its shareholders haven't gotten a penny in dividends in over 10 years. That simply can't last forever - not for a public company. Sooner or later, the backlash will come.     

Also, Wal-Mart, with its thousands of brick and mortar distribution centers (a/k/a stores) already in place, is taking giant steps to compete head-on with Amazon online through its own website. Fools rush in where angels fear to tread.   

Get Back to Your Roots as the World's "Flea Market".  The one thing eBay consistently does better than Amazon or Wal-Mart is used, secondhand, antique, collectible and other one of a kind merchandise that is best sold through auctions and competitive bidding. Over the years Amazon has tried to do auctions, but has always failed.  

By all means eBay should continue to offer fixed price ("Buy It Now!") merchandise, but auctions have always been eBay's core strength (remember it was originally called AuctionWeb). Yes, it's a much smaller market, but eBay can own it with minimal effort, and with zero competition from Amazon or Wal-Mart.

Become the World's Leading Online Auctioneer. One of eBay's most valuable yet underdeveloped assets is its Live Auctions website, where buyers can sign up to participate in "live" auctions hosted by small to midsized auction houses around the world.  A decade ago, eBay ruled this market.  eBay needs to get back into this game big time, and give current market leader Heritage Auctions a run for its money.  

Empower - No, Worship -- Your Sellers.  Until 2008, eBay was two things - a Fortune 500 corporation based in San Jose, California, and a worldwide community of sellers and buyers engaged in peer-to-peer e-commerce.  Starting in 2008, eBay effectively destroyed that community by raising its fees through the roof, imposing onerous rules which small and casual sellers couldn't meet, giving preference on its search engine to large-volume sellers, and eliminating its outreach programs for sellers (including its annual "eBay Live!" trade show and "eBay University" seller training courses), among other things. 
 

Now, to be fair, eBay had the best of intentions. There were an awful lot of bad, even downright crazy, sellers on eBay back in the day which hurt its reputation as a safe and reliable marketplace. But trying to impose MBA-type discipline on millions of casual, part-time and inexperienced sellers (a/k/a "herding cats") backfired.       

Amazon has so far successfully courted these people with its popular "fulfillment by Amazon" (FBA) program. But, unlike eBay, Amazon competes with its third party sellers, exposes them to complicated sales tax liability and offers them little or no support. There has never been, and never will be, a community of Amazon sellers. If eBay offers the right incentives and rebuilds its community initiatives, it can lure most of them back.

eBay's true business has always been the empowerment of Mom and Pop retailers, and it has to cultivate them again if it plans to survive. eBay Marketplace has announced plans to lay off thousands of its employees worldwide, many of them in seller support and community functions. That would be a colossal mistake, and needs to be reconsidered. Unlike Amazon, eBay Marketplace relies on third party sellers for 100% of its revenue. It needs these people.

Small retail and wholesale businesses cannot survive any more as brick and mortar entities. They have no choice but to sell exclusively online. If Amazon blows them off (as sooner or later I predict they will), where will they go?


Cliff Ennico (www.succeedinginyourbusiness.com), a leading expert on small business law and taxes, is the author of “Small Business Survival Guide,” “The eBay Seller’s Tax and Legal Answer Book” and 15 other books. COPYRIGHT 2014 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com.

 

Posted by Staff at 5:01 AM