Philosophical question: why is eBay afraid of being America’s flea market?
I like eBay. I especially love the concept of eBay. It is easy to forget that just a few years ago, there was no eBay.
For years economists have used in their models the idea of a frictionless economy, which is one where both buyers and sellers know as much as possible about any particular item being sold, and about the market itself. Sellers can set fair prices and not accidentally price too low. Buyers can determine whether a seller’s price is reasonable and whether they are less likely to get ripped off. Before the Internet, this was a fiction used to illustrate how free markets should work. Until eBay it was understood that such an economy could never exist, but that as an illustration it could be used to calibrate the success of any transaction or market for both parties.
This problem led to the market for so-called “blue books”. These were expensive yearbooks issued in particular markets to help buyers and sellers determine good prices for things like cars and comic books. In theory it’s a good idea, but it’s one that has always favored the dealers. The blue books tended to be vague about where data came from. They would cite things like auction results and newspaper ads, but no rigorous explanation of their methodology could ever be found. So if you were a 14-year old who was assured by a comic book dealer that a comic was worth $100 and you paid only $50, the dealer would “prove” it to you with the blue book. Of course, when you tried to sell the comic back, that $100 would suddenly become $7, and you’d get some muttered dissembling about fluctuating market conditions. I always thought the blue book ideas was corrupt, and I remember seeing that notion proved when a guitar I know to be nonexistent was listed in a blue book with 3 different price ranges, one for each possible condition.
The power of blue books has decreased dramatically with eBay, and thank heavens for that. Think about it: eBay, or whatever replaces eBay if they don’t start minding the store, is the closest we’ll ever get to a frictionless economy. You can see what people were actually willing to pay for something, if they were willing at all. How cool is that? You can often see photographs of the actual item, and even, occasionally, comments from other customers. An economist’s dream come true, and in fact thousands of academic papers have relied on eBay data in the decade or so eBay has become a potent market force.
And yet for some reason eBay wants to become Amazon. Why?
My theory is this: top management at eBay is ashamed of of being America’s flea market. I think when they go golfing with their Silicon Valley cronies and hear about the latest play in social media or Amazon’s amazing profits, they’re a little bit embarrassed. eBay is so low tech. It’s so 1995. It’s so… regular people. I think they’re throwing away an opportunity to become bigger than ever. Why not just be happy that you’re the best flea market there ever was? The concept of the agora is an honorable one, dating back thousands of years. Remember the stand-up philosophers in Mel Brooks’ “History of the World?” Something close to that really happened. Philosophers did sometimes stand up on platforms and try to sell their ideas while throngs of consumers shopped for grapes and olive oil. The marketplace was thought to be an essential element of society, and might be thought of as the birthplace of the concept of free speech here in the West. Even if that sounds pompous, eBay is undeniably a vibrant expression of the near-frictionless market and is nothing at all to be ashamed of.
I’d rather see eBay spend an extra $50 million on fraud control than blow another billion on the next Skype. And I bet their bottom line would like it too.
Simply put, Bravo! I’ve been an eBay member for almost 10 years and it saddens me to see how far the company has drifted from its original mission. Like all monopoly enterprises, eBay has allowed complacency to creep in and dull its entrepreneurial spirit. Let’s all hope that eBay will come back before it is overtaken by a young upstart who hasn’t lost sight that in the world of capitalism, it is the customer who in the end always comes out as king or queen. Just ask GM, Chrysler and other dinosaurs of a bygone era!
@Subway228, let’s hope eBay doesn’t end up asking for a bailout!
Cheers,
The Management
I agree 100% with your comments about the decline of eBay. I think your assessment of the cause is close, but I see it as another example of modern corporatism – it is anathema for people at that level of management to just leave things alone. How can they leave their mark (and impress the other CEOs on the golf course, to use your analogy) by bragging about how the store is running itself? No, they must take the initiative and be change agents to create a new paradigm! I don’t think they are embarassed to be running a global flea market, they just can’t be in charge of anything without monkeying around with the controls. It wouldn’t matter what they started with, the important thing is to enact change. Do something – even if it’s wrong!
I’m afraid eBay is too far gone to be saved, and the upcoming internet tax changes will only stregthen their resolve to get rid of the flea market vendors (myself included) and become another internet five and dime store. What is needed is competition – where are the Facebook and Twitter style entrepreneurs of internet auctions?
Great article. Couldn’t agree more
@Matt, your assessment hews uncomfortably close to our situation at eSnipe. Our business has declined for the last couple of years. Considering that almost half of eBay’s auctions are Buy it Now we’re doing great, because our business hasn’t dropped by that much. But it is down, and I am taking measures to improve it. This might, I fear, look like “corporatism”, or the urge to change things just for the sake of change, rather than delivering a better customer experience. Michael Medved calls it “do-something disease”, a problem I try consciously to avoid.
I love your point about the store running itself. I think I have other examples to back you up. I remember the purchase of Half.com, for example, as a panic measure forced on eBay by clueless Wall Street analysts with too much time on their hands. Half.com was a fine business and should either have been left alone once purchased or should never have been bought at all.
Where are the Facebooks and Twitters of the new auction world? I think that analogy doesn’t apply. First off, Facebook and Twitter were reasonably original creations without strong competition. eBay is a colossus. It has no natural enemies and can easily devour anything that poses even a minor threat. Craigslist is about as close as it gets (and eBay owns about a fifth of Craigs anyhow). There’s been lots of competition, and eBay has crushed it all handily. eBay seems to me like the IBM of 1995 or the Microsoft of today. Big, slow, losing its edge, and no longer in touch with its customers, yet fully capable of taking all comers. Remember, not even Yahoo! or Amazon could hold a candle up to eBay in the auction world. We had support for both of them and the needle didn’t even budge.
Cheers,
Tom Campbell
Tom, sorry to hear about your decline in business. I guess it’s logical considering the changes in eBay. I don’t think your changes to make up losses equate to what eBay has done – I think their changes have caused their losses – at least in part. I hope you guys continue to be successful – pretty much everything I buy thru eBay auctions is done with eSnipe.
As regards Facebook, I was just comparing it to Myspace (remember them?) which was all anyone was talking about a few years ago. But you’re right – Myspace was never in the position to gobble up similar websites like eBay can.
I guess we’ll see how it all shakes out.
My theory is this. eBay sales of $60 billion mostly going on second hand goods and to mom and pop stores was too tempting for the corporates. The financial sector (The Street et al) put in place directors from their midst (eg Bain & Co) who would ‘repatriate’ that money in to the pockets of big business where of course it all belongs. Thus began the death by 1000 cuts for small sellers, the constant ‘eBay is improving’ where every little step makes it slightly worse for the traditional seller whilst big time sellers get discounts and favors. The Street saw eBay’s main asset as the eyeballs and so eBay introduces more advertising from the corporates.
I don’t believe it’s accidental, I don’t believe it’s incompetence. If eBay goes to zero the money will get spent anyway, from Wal-Mart to Fifth Avenue more will be spent and the bankers in The Street etc will take a bigger cut and a bit more power away from the ordinary folks.
I have only been an ebay seller for not quite 5 years. To me, Ebay has improved visibility or access beyond the FAQ when I encounter a problem posting and 60% their suggestions are helpful. I like Ebay better than Amazon both as seller and buyer. I may have to revert to becoming a Store but I like the flexibility, for now, as a plain vanilla seller.
I think part of the issue about their price hikes has to do with finanacing Meg Whitman’s billion-dollar exit parachute. At first I thought that was a crafty misprint (few folks like CEOs now and will pounce at any opportunity to annihilate them) but it was written up in a Forbes’ article a few months ago. A billion $$! Who in this world deserves that for a 10-year stint bonus!!?
I worry more about the extravangance of out-of-control government on all levels affecting both your and my business. The 1099s for 2010 appear to be full-employemnt for accountants and tax attorneys. The rest of us will be standing in an employment line applying for bus staff on Meg’s ocean liner…LOL (wahhh!).
Take care. Ken
Really great article. I only wish eBay management would read it and take it to heart. Or, at the very least, take it to an executive meeting. I’ve been selling since 1998 and am very disappointed in the direction eBay has taken. It used to be fun.
I don’t understand why eBay would feel less important because of its original business model. It was the first social network ever where people would gather and shop, talk through email and even meet personally at eBay Live. If anything eBay’s original model was truly revolutionary. It really set the ground for e-commerce. They should be proud of what they accomplished, not ashamed of it.
It is also important to note that even at real world flea markets one can make a good honest living. There are also high end items at flea markets and people flock to these events. As long as there are good Sellers offering quality, unusual, authentic items at the right price customers will come. For the web version of this, add good customer service, truthful and detailed descriptions and accurate photos and you have a winning combination.
I was very happy to hear that eBay is considering a return to it’s origins, it should have never left them. This is the essence of eBay, it is what made it so much fun and attractive to both Buyers and Sellers. They should really be proud. As for regaining the trust of Sellers, well, that’s another story all together.
Vera Battemarco
Vintage Jewelry, Fashion Magazines and Fine Collectibles plus Jewelry by Vera Battemarco
I’ll make a bold predicition.
without the “pulse” of ebay pricing, listing, item comparisons, sold histories half the online transactions world will crumble quickly.
A barometer is a very useful tool, especially a publicly accessible one. Ebay harms itself by decreasing sold items listings info to 15 days now. As info decreases, the good buyers will leave.
but, i think without a valid barometer, they will leave online shopping for many items rather than change venues. They’ll just walk over to their local flea market, or antiques shop, or wal-mart or other store instead of even trying to track down enough info to know if they are getting a bargain online.
After all, why shop online for ANY item which is even remotely possible to buy locally unless you have tools on hand to let you do a good comparison? I would not bother. Tracking down related data online, from multiple sources would be more burdensome than useful.
@Nilrem (yes, I like the sdrawkcab spelling): l hadn’t thought about that angle. I do not pay enough attention to eBay’s board, so I can’t offer a competent reply to your analysis. It feels right, though. Dang, we’ve got some smart commenters on this blog!
@Katie:
Wow. You made the point better 5 words than I did with the entire post. Bang on!
@Vera, your point about eBay being a pioneering social network is novel and of course true. I never thought of it that way. V. perceptive. Obviously I too feel that selling at flea markets is an ancient and honorable tradition.
I am skeptical about a return to roots. I hope it happens.
@vince, it’s self-destructive for eBay to decrease not increase the available information about their transactions for precisely the reasons you offer. Weird that they’re doing it, though it probably does reduce fraud somewhat.
Absolutely brilliant. Very well articulated view that many of us share and have been unable to give words. I plan on bookmarking this and referencing it in the near future. I think everyone who cares about ebay could stand to read it.
One aspect I have missed the most is how fun and simple it used to be… and still is. But, I can feel it changing. I like what you said about how its trying to be Amazon. It just feels less like a big open market and more and more like a big machine which needs you to be a little cog in it doing exactly what they tell you.
@Matthew, it is so easy to be a Monday morning quarterback, as I was in my original post. I imagine that with increased fraud attempts (and eBay takes punishing blows every second from determined bad guys) they have no choice but to tighten the restrictions on those of us who behave honorably. I think their problem is more fundamental, though, because they do appear to fear their own roots.
And sorry I took so dang long to reply.
Cheers,
Tom Campbell
Very well put! The latest attempts have been these contests for sellers and their affiliates etc…but they definitely need a bigger sense of revival. Their acquisitions of craigslists, skype, stumbleupon have done little…and im sure the vast majority of people are unaware of their association. Go back to caring for their people that have been loyal to them over the years. It is sad to see them continually raise prices so margins are tighter than ever. Someone needs to solve the great eBay Solution
@elise, lots of people agree with you. I love the phrase “bigger sense of revival”. I wonder if we can ever go back to the giddy early days of eBay. Maybe. Certainly a lot of people have felt some of the same jolt with Twitter, Facebook, and their ilk.
Cheers,
Tom Campbell
If you read the appendix to _The Paypal Wars_, you’ll find some verification of what you’re saying. eBay’s management tends to consist of a cultural elite from big name universities. Consequently, they tend to look down at others, including their very sellers who replace what they have of book smarts with street smarts.
@Jurgen, you’re right about “The PayPal Wars”. I read the book with utmost fascination but I omitted mention of it because the events happened so long ago. I could have rattled off another half-dozen pieces of evidence from that era but decided to stick to the here and now. The more I think about it the more historical context probably would have helped. Thank you.
I agree with you completely! eBay used to be fun, but those days are long gone. The policy of hiding who is bidding, who is buying, and who has bought makes it impossible to use one’s buyer’s skills for ferreting out who is likely to be a competitor. Of course, eSnipe made it that much more exciting, because one never knew when the snipe was going to come in!
eBay’s insistence on our using their very own PayPal for paying is infuriating, too. They skim from the seller twice and the buyer once. I really hate that they charge sellers for PayPal and that there doesn’t seem to be a way around using it…..