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EBay Plans to Emphasize Fixed-Price Sales Format

Laurie J. Flynn|The New York Times
Wednesday, 20 Aug 2008 | 10:03 AM ET

Acknowledging that most online shoppers cannot be bothered with auctions, eBay plans Wednesday to announce changes to its fee structure that emphasize fixed prices over bidding. The move is intended to help eBay compete more effectively with Amazon.com and other big online retailers.

The announcement, timed to increase sales during the holiday shopping season, is just one of the changes eBay has made in the last few months aimed at reducing its dependence on its auction business, which is growing more slowly than fixed-price sales. It provides yet more evidence that consumers are losing interest in auctions now that online shopping sites have become more affordable and easier to use.

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“Buying online has changed,” said Scot Wingo, chief executive of the market research firm ChannelAdvisor. “Retail sites no longer make customers choose between convenience and price.”

Lower upfront fees will enable sellers to offer a bigger selection, helping eBay better compete with fixed-price retailers, Mr. Wingo said. “The current system puts eBay at a disadvantage.”

Among the changes being announced Wednesday is a new pricing plan for sellers who offer fixed-price items in eBay’s “Buy It Now” format. Starting in mid-September, sellers will pay only 35 cents to list an item for 30 days, a reduction of about 70 percent in upfront fees. EBay also announced that it would no longer allow most customers to pay by check or cash, a change aimed at curbing fraud. Users will need to pay with a credit card or through eBay’s PayPal online payment service.

John Donahoe, eBay’s chief executive, has vowed to make eBay a better place for buyers and return the company to more solid growth. Last month eBay said that gross merchandise volume, the sum of all transactions on the eBay marketplace, grew only 8 percent in its most recent quarter, a sharp reduction from the double-digit growth of previous quarters. While revenue was up 20 percent to $2.2 billion, the rise was fueled mostly by growth in advertising, global classifieds and PayPal.

The company’s auctions business generated 57 percent of the company’s revenue in the most recent quarter, but growth has slowed.

“Clearly there’s a strong buyer preference for fixed price,” said Lorrie Norrington, president of eBay Marketplace, which includes the eBay site.

Rhonda Shrader, who sells women’s clothing on eBay from her home in South San Francisco, said she had already moved most of her sales to a fixed-price format. She was pleased that eBay was reducing the fees sellers pay to list items. That way, she said, she could offer a bigger selection. Most of her customers are professional women who know exactly what they need and are looking for a reliable, convenient source, she said.

These days, Ms. Shrader says, only about 10 percent of her sales are from auctions. “I think the auction was a novelty at the beginning, but now people want what they want, when they want it,” she said.

The new approach is likely to win praise from many sellers who prefer the lower upfront costs, but will certainly anger many of eBay’s longtime customers, most of them small-time collectors who depend on auction pricing to move one-of-a-kind inventory. Others simply think that many of the changes Mr. Donahoe has pushed through unfairly favor larger sellers.

“The previous management tried to fight it,” Mr. Wingo said, referring to the growing preference for fixed pricing. “This management is more willing to ride along with it.”

Last month, the company announced a deal with the e-commerce site Buy.com that allowed it to sell its items on eBay without paying the same fees charged to smaller sellers. That deal provoked accusations of betrayal from many of eBay’s loyal independent sellers. Some sellers who are frustrated with the changes have organized boycotts, and some even tried to disrupt eBay Live, a company event for top sellers that was held in June.

Yet even as it shifts away from the model that made it unique in the first place, the company insists the auction model is still viable, and that it intends to offer sellers and buyers a choice of formats. Auctions are often a better approach for sellers when items are in high demand, the company says, or when the seller is uncertain of an item’s value.

“We love the auction model,” Ms. Norrington said. “It’s still a great model for certain types of sales.”

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