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EcommerceBytes-NewsFlash, Number 1996 - March 12, 2009 - ISSN 1539-5065    1 of 2

eBay Strategy Revealed: Overstock Inventory from Diamond Liquidators

By Ina Steiner
EcommerceBytes.com
March 12, 2009




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eBay delivered a broad overview of its business to analysts on Wednesday and painted a rosy picture - for the year 2011. But it was during the Question and Answer segment of eBay Analyst Day that sellers got a sense of eBay's strategy with regard to its marketplaces business. "Secondary Markets" was the terminology executives used throughout the day. ("The secondary market is a sweet spot with a global opportunity of $500 billion dollars a year.") Translation: overstock inventory served up by Diamond level PowerSellers advantaged in a number of ways, including lower fees and better exposure in search results. Just the message that small, longtime sellers on eBay didn't want to hear.

Although it was less than a year ago that executives spoke about moving eBay to a more "retail-like" experience, CEO John Donahoe was firm on Wednesday that eBay was not a retailer. All the talk about Secondary Markets, where there are "inefficient supply chains and sellers looking for velocity," deflected analysts from comparing the company with Amazon.com, which has beefed up its third-party seller business and performed well in the fourth quarter.

Donahoe said the marketplaces business would be down in 2009 as eBay fixes the fundamentals by doing the following: improving the user experience, innovating through technology, and strengthening complementary formats.

eBay created a special deal with Buy.com last spring; introduced Diamond PowerSellers in June; and launched a "large merchant services" API just before Thanksgiving. Mercent, a third-party vendor, launched "catalog merchandising and order integration software" integrated with the new API and began bringing on large multi-channel retailers on to the eBay site.

Mercent CEO Eric Best participated in a dialog on the Twitter service with others who were following the Analyst Day webcast. He wrote, "Stay tuned for upcoming Mercent news regarding eBay Large Merchant Services APIs and new FP seller stores in coming days and weeks."

eBay's strategy of advantaging a class of sellers is different from the company's early years, when managers simply brought buyers and sellers together. Founder Pierre Omidyar championed the concept of the level playing field, and former CEO Meg Whitman frequently told the story of how it was users who inspired the idea for eBay Motors by listing autos on the site without guidance from eBay. But today's executives reject the "invisible hand" philosophy and are instead using a heavy hand to influence what will be sold, who will sell it, and how.

The first part of Analyst Day was consumed with messaging about eBay's "portfolio" of businesses (eBay, PayPal and Skype). eBay as a company is undervalued to the point that it keeps Chief Financial Officer Bob Swan up at night, "miffed."

PayPal, clearly positioned as the star of the portfolio, will launch a new checkout later this year integrated with its new acquisition, Bill Me Later. Skype is the enigma, not providing synergies with eBay or PayPal, but according to John Donahoe, "not a distraction," either.

Two eBay executives talked about the eBay marketplaces. Lorrie Norrington, President of eBay Marketplaces, defined what eBay meant by the term secondary market in answering a two-part question from one of the analysts in attendance. "At the highest level, this is a pretty natural extension of the business that we're in. When you think about what we built eBay on, the used segment of the secondary markets, this is about looking in off-price retail, in warehouses, in liquidators, and bringing those things that are literally sitting offline to online. It's as simple as that."

Norrington also said it's about "making sure that we are doing right the acquisition and right marketing with those sellers together. We're changing how we actually show some of those sellers, those larger sellers, on eBay."

Stephanie Telenius, SVP & GM, North America Marketplaces, gave some examples of secondary market sellers, including Buy.com, SmartBargains for clothing, TigerDirect in the electronics space, and Act and Powell in the book space. She said eBay was ramping up its business development.

Telenius also said eBay is letting companies brand themselves on eBay. "We're creating branded pages where the merchant can control the experience, and we're working with them to onboard lots the inventory."

Mercent's Best liked what he was hearing from eBay. He tweeted, "Focus on expanded sell formats, search and catalog fixes - should bode well for Mercent and our ecommerce clients," and "Love the Amazon-like approach to single detail pages including FP, auctions, classifieds and ads - with real merchandising options."

A commenter in the AuctionBytes Blog who was following Analyst Day wrote that they saw eBay trying to become the shopping destination of the Internet. "Now I see them as moving toward a search portal. Trying to be like Google for shopping, they will still have the small seller listing through or directly via ebay. But somehow they want all the items sold on the internet to get exposure through ebay, should be interesting."

AuctionBytes Coverage of Analyst Day

EBay Analyst Day Notes
Link to blog post

EBay Analyst Day Notes, Part Two
Link to blog post

eBay Analyst Day Notes, Part 3
Link to blog post

About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

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