Will eBay survive its midlife crisis?

Once upon a time, eBay was the go-to marketplace which  empowered people to start their own enterprises. As a unique peer-to-peer selling platform that inspired fierce loyalty, it revolutionised the small business sector. But where is it heading now?

eBay’s auction format allowed it to carve out a unique take on online selling and an extremely profitable niche because it appealed to both small and large-scale merchants. Fast track a decade or so, and eBay is undergoing a re-evaluation of its core mission and values.

Growth has flattened. Auctions only make up 20% of eBay sales. Operating margins are falling as a result of deliberate changes to its business model. Or is it a sign of its impending demise?

Ok, maybe that’s a bit dramatic for a company with $8.5 billion in revenue.

Still, eBay is undoubtedly in a spot of bother. You might call it a midlife crisis. Its current plight lies in maintaining its niche in testing times; to reposition itself for long-term success while retaining and growing its loyal customer base.

“Less Auction Site, More Trusted Retail Partner”

As one senior executive put it, eBay now sees itself “as less auction site and more trusted retail partner”. With 80% of the items sold being new according to its investor presentation, it’s hard to disagree.

So shifting towards fixed priced listing is the solution? Clearly not, as that would bring eBay in direct competition with Amazon. And that is a fight eBay can’t win.

Maybe eBay will be more successful in luring large retailers in the long term, an area Amazon hasn’t been its usual dominant self. Though Amazon are unlikely to be worried. In the clothing industry, it has already employed an unconventional twist on the “if you can’t beat ‘em, join ‘em” motto.

Amazon has had trouble convincing large clothing retailers to sell on its marketplace. So it has launched seven clothing brands to fill the ‘gaps’ in its clothing offering that it couldn’t fill with mainstream brands.

If you can’t get ‘em to join, replace ‘em.

So how will eBay differentiate itself from the big A? CEO David Wenig has already said it won’t try and compete with Amazon on delivery, but would rather work with new delivery initiatives like Uber Rush. It may be changing its focus to a budget deals site according to some speculators. But isn’t that what it already is?

Maybe it’s finally learning from the eCommerce master itself. Having recently announced the launch of Promoted Listings, eBay has taken a leaf from the Amazon rules book – specifically the page on Amazon Sponsored Products.

So while eBay’s long-term identity is still in limbo, let’s look at a real problem that’s slowing both its growth in buyers as well as sellers.

Those Pesky Fees

Is eBay moving away from a model that supports small businesses to one that encourages established retailers?

Thanks to prohibitive seller fees taking about 8-12% of your gross sales, eBay is no longer a place where small sellers can prosper, according to MyWifeQuitHerJob.

Complaints about fees on online marketplaces is nothing new. But combined with the use of its estranged sibling PayPal, eBay really gets the lion’s share of moans thanks to fees appearing at various stages of the sales cycle.

If these gripes are to be taken at face value, then maybe eBay should be focusing more on becoming a more inclusive, business-friendly marketplace, rather than alienating the loyal small sellers in its crusade to attract the bigger ones.

eBay sellers are well aware of fee hikes – they’ve been happening pretty regularly since 2011. Fee hikes are part of the package when you fish in the eBay. You can take the hike and keep fishing, or find another pond to cast your line.

A Recipe for Success?

If you’re going to change the direction of a marketplace as big as eBay, the omelette won’t be made without cracking a few eggs. The eggs in this case are the foundations eBay was built on – auctions and the loyalty of small sellers.

Reduce these ingredients in the eBay recipe and what will you get? A flavoursome new dish, or inedible mush. Only the egg timer will tell.