EBay: Auction Site? Or Discount Store?

As the retail sector continues to struggle—with June store sales falling short of expectations and consumer confidence dropping nearly 6 percent—online retailer eBay is rewriting its marketing strategy for the upcoming holiday season.

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Packaging itself as the place to go for cash-strapped consumers searching for high-quality goods, eBay kicked off its new strategy at a press event on the Upper East Side of Manhattan Wednesday.

"[EBay is] a place where you can come and search for anything, and you're going to get it at a great value," said Lorrie Norrington, president of eBay Marketplaces. "A lot of people in a very tough time want to enjoy things, but they don’t want to pay high prices."

Through the auction portion of the company's site, items typically sell for 20 to 60 percent below their retail price, said eBay spokesperson Karen Bard.

This could be particularly important for the upcoming holiday season, as 36.2 percent of consumers plan to spend less this coming holiday season than last, according to BigResearch.

Among the 1,400 displayed items at the event were a 61-karat white and yellow diamond necklace — set at a fixed price of $218,000 — and a table of items valued at $20 or less, including a weathered 1978 board game. The products will be sold on both the site's auction and fixed-price sections.

Another way eBay says it's adjusting its strategy is by targeting the site's highest quality sellers, who increased their year-over-year sales by almost 14 percent last quarter.

The retailer recently announced an initiative to reward sellers who are rated highest by buyers for customer service, and these sellers will receive discounts and be elevated in search. The company said in a press release it expects to extend this service to about 150,000 sellers.

Despite the tough economic environment, Norrington said that online retail still has a lot of room to grow. According to Forrester Research, online sales reached $141 billion in 2008, despite only accounting for 6 percent of the sector. But Norrington said she can easily see this number hitting anywhere between 10 and 20 percent.

"When we see consumer spending go up, we'll see retail go up," she said.

EBay has also seen increased competition from rival Amazon.com, which recently acquired Zappos online shoe store.

And its auction business has been hurt. Last week, eBay announced that net income fell to $327 million, or 25 cents a share, compared with $460 million, or 35 cents a share, in the year-ago quarter. The company's revenue fell 4 percent to $2.1 billion—but that was better than the 9 percent drop analysts forecasted.

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