eBay – No More Auctions?

Back in 1995, Pierre Omidyar launched in his San Jose living room “the AuctionWeb”, a site dedicated to bringing together buyers and sellers in an honest and open marketplace. Two years later the company was renamed “eBay”, which has thus far expanded into 190 countries. eBay was once regarded as the go-to place known for cheaper and affordable collections from all over the world. However, Amazon later took the ball rolling and changed e-commerce standard by offering delivery and membership services at its core. In China, eBay faced strong headwind and later decided to exit the market, only to keep the vast seller network to exported goods to other countries. In India, eBay had made a cash investment of $500 million and sold its Indian business to Flipkart in exchange for an equity stake of the upstart [1].

eBay, arguably the first-mover at global e-commerce and a sustaining enterprise who survived the dotcom crash, has undertaken several big and painstaking transformations in the past, but still face many challenges nowadays. Incumbent platforms expand aggressively at home and abroad. Vertical sites, with laser-focused merchandizing strategy and superior customer service, are luring customers away from eBay. How should it continue transforming itself to retain customers and win in competition? As technology shapes new shopping habits and journey, how should eBay innovate and capitalize on the trend? What opportunities should eBay prioritize? Should eBay diversify into other avenues like Amazon, Alibaba and JD.com did?

 

First Transformation: from Auction to “Fixed-Price” and “Buy-It-Now”

Auction worked well initially for eBay when customers are willing to sacrifice speed for lower price. The format quickly lost traction when Amazon entered by selling branded, high-quality products at a fixed price with quick delivery. Customers fled from eBay for the novelty and better services at its opponent. What’s more, auction is not the most effective model in driving sales conversation. A very high percentage of auctions do not end in sales. Finally, eBay decided to shift away from auction model by introducing two major changes:

First, shift pricing scheme from auction bidding to fixed price. In auction model, customers would wait for days to know if they win after spending time to strategize and put down a bid. It limited item selections because it only work for products that are not in urgent needs. Adopting a fixed pricing model enlarges items that could be sold on platform and recruited customers beyond auction-lovers. It’s said that eBay have expanded their fixed-price merchandise business to offset their shrinking auctions section [2]. Second, offer sellers options to switch from auction to “buy-it-now”. As shopper become more reliant on online shopping and new choices emerge, customers have higher expectation on convenience, immediacy and quality. This move would effectively increase the conversion rate and reduce frictions in purchase process. Up till now, eBay is continuously and actively devoted to shifting away from the sticky brand perception of being only an auction site.

 

Second Transformation: from “Listing-based” to “Product-based” Structured Data

Combing though dozens of similar listings within eBay’s vast inventory has made the shopping experience time consuming and frustrating – driving buyers away from the site [3]. As more and more sellers join eBay’s site and the number of listings kept growing, it became increasingly difficult to manage and organize data.  The less structured listing-centric data also made it difficult for search engines such as Google and Bing to effectively index eBay, hence eBay lost opportunity to capture traffic from search engine [4].

In order to transform the shopping experience to be more product-based, eBay launched in September 2014 a structured data transformation initiative, in which listing will be collapsed and grouped by product instead of individually listed [3]. A product-based shopping experience will make it easier for buyer to perform precise searches to find the merchandise they want and covert to purchase more quickly, meanwhile, it also increases visibility in search engine results, bringing in more organic traffic. eBay also made efforts to educate and encourage its sellers to associate their product to the eBay catalog, which is a central repository of product information that allows seller to more easily associate product with the specifies buyers are looking for. By earlier 2017, 180 million structured data pages are live on the site [5]. The number is projected to grow quickly as eBay plans to make it a mandatory and standard process for all sellers starting from May 2018.

 

Future Potential Transformations:  from Pure Marketplace to “Shopper-Centric Hybrid”?

e-Commerce space is becoming crowed as more niche and vertical sites came to existence. As technology evolves and transforms customers’ perception and shopping habit, eBay should immediately act upon the trend and look for ways to develop an edge.

Opportunity #1 – Stronger Ties with Sellers

Many smaller sellers complained about being disintermediated by Amazon, who would poach the supplier directly and attempted to cut smaller sellers from the game. Despite lured by the velocity of sell-through and volume sold on Amazon website, more and more sellers realized the trade-offs between short-term gain and potential risk of being disintermediated or being forced to lower price. It presented an interesting opportunity for eBay, who operates an asset-light model and benefit by having more buyers and merchandizes on its platform. eBay could build a better relationship with small to medium sellers by allowing more flexibility and building a community to strengthen ties.

Opportunity #2 – Artificial Intelligence Application

eBay is extremely focused on its AI initiatives which the company considers to be an essential “survival” requirement for the future [6].

First, on personalization, while others recommend product based on browsing histories, eBay is looking to deliver a highly personalized consumer experience of showing exact or near exact match [6] based on descriptive and predictive models. This initiative brings eBay a long way from where it began its turnaround initiative. Second, eBay rolled out two visual search features — Find It On eBay and Image Search — for its mobile app in 2017. The Find It On eBay feature allows customers to search for products by sharing images from social media platforms. Image Search enables customers to find similar listings with pictures [7].

Opportunity #3 –Better Services for Buyers

With a platform play, eBay has limited control over its shipping which has a direct impact on customer experience. Alibaba tried to mitigate the risk by establishing a logistic consortium which rallies up the capable logistic suppliers and ensure better quality. JD.com went to the other extreme of building fully automated factory in-house and its own distribution center and delivery fleet in order to realize fast delivery speed and high quality service for buyers.

So far eBay’s efforts was primarily on sellers side – first, a valet service in 2014 to simplify selling items on eBay by having eBay valets handles the entire process [9]; second, a seller drop-off program to FedEx stores across the US to make it easier for shopper to ship items [10]. Although there’s spillover effect from sellers to buyers, how to directly improve buyers’ experience is a question for eBay.

Opportunity #4 – Acquisitions, Partnerships, Coalitions

eBay has been known to expand its capabilities through acquisition, for example, acquisition of Korean auction site Gmarket to strengthen its core, adjacent acquisitions of Stubhub for synergies and other technology acquisitions. eBay also relies heavily on partnerships or coalitions to better its service. It’s reported that Japan-based e-commerce Rakuten and eBay will launch stores on each other’s platforms in hopes of expanding international business and cross-border sales. eBay’s acquisition, Gmarket in Korea, will launch a flagship store on Rakuten to sell Korean fashion and beauty products to Rakuten’s 100 million monthly active users [10].

 

 

Looking Ahead

The company has been doubling down on its marketplace business since spinning off PayPal last year. In particular, eBay has become “more Amazon-esque,” says James Cakmak, analyst at Monness Crespi Hardt [2]. As eBay’s CEO Devin Wenig said, “we continued to transform the shopping experience on eBay, delivered more personalization capabilities and began to activate our updated brand messaging” [2]

It won’t be easy for eBay to catch up with the incumbent while defend itself against new intruders. As we look into the future, would the 20-year old e-commerce giant be able to re-establish itself through multiple continuous transformations? Is the hybrid model a must in order to win in today’s heated e-commerce market? If yes, should eBay continue its partnership model (also Alibaba’s approach) or selectively develop some capabilities in-house?

 

References

[1] Flipkart completes eBay India merger, https://economictimes.indiatimes.com/small-biz/startups/flipkart-completes-ebay-india-merger/articleshow/59858165.cms

[2] eBay continues shift to Amazon-esque business,  https://techcrunch.com/2016/10/19/ebay-continues-shift-to-amazon-esque-business/

[3] eBay structured data, www.pages.ebay.com/seller-center/listing-and-marketing/structured-data.html

[4] eBay’s future success rests on more structured data, https://www.channeladvisor.com/blog/marketplaces/ebay-moves-toward-structured-data-and-why-it-matters/

[5] eBay makes progresses with structured data, https://www.digitalcommerce360.com/2017/01/26/ebay-makes-progress-structured-data/

[6] A Closer Look At eBay’s Focus On Artificial Intelligence,  https://www.forbes.com/sites/greatspeculations/2017/07/10/a-closer-look-at-ebays-focus-on-artificial-intelligence/

[7] eBay boosts AI capabilities, http://www.businessinsider.com/ebay-boosts-ai-capabilities-2017-11

[8] eBay hires Jan Pedersen from Twitter to spearhead its AI efforts, https://venturebeat.com/2018/02/13/ebay-hires-jan-pedersen-from-twitter-to-spearhead-its-ai-efforts/

[9] EBay Extends Drop Off Service to 1,600 FedEx Stores, http://fortune.com/2016/05/10/ebay-fedex/

[10] eBay forges key partnerships as it tries to jump start growth, http://www.businessinsider.com/ebay-partners-with-rakuten-and-fedex-2016-5

[11] History of Ecommerce: The Amazon Effect, http://info.mkmdistribution.com/blog/bid/382534/history-of-ecommerce-the-amazon-effect

[12] An Inside Look at eBay’s Global Innovation Strategy, http://deloitte.wsj.com/cio/2014/08/25/an-inside-look-at-ebays-global-innovation-strategy/

[13] Why 2017 Was a Year to Remember for eBay Inc., https://www.fool.com/investing/2017/11/28/why-2017-was-a-year-to-remember-for-ebay-inc.aspx