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EcommerceBytes-Update, Number 287 - May 22, 2011 - ISSN 1528-6703     2 of 7

Fuji Arts Finds Life After eBay

By Kenneth Corbin

May 22, 2011

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When eBay began rolling out its Best Match search algorithm across the marketplace, sellers took immediate notice. It hit the category of Japanese prints in September 2008, and for Bill Fagan, who runs the Fuji Arts store specializing in fine Japanese art, the impact was swift and severe.

For the year preceding the Best Match implementation, Fuji Arts had been selling between $70,000 and $110,000 monthly on eBay, which accounted for 85 percent of the company's gross business. Immediately following the introduction of the new search algorithm, sales plummeted 40 percent.

"I remember sensing right away that something was wrong even though I rarely looked at the eBay front-page posting returns," Fagan recalls. "It took a few days before I discovered it was this huge search change that was killing our business."

On eBay, Fuji Arts was an auction-heavy shop that held a commanding position in its niche category. The shift to Best Match as the default search, which has caused no shortage of angst among many long-time eBay sellers, had Fagan staring at the prospect of layoffs at his seven-person business.

While eBay was attempting to shift the marketplace toward fixed-price listings and away from the auction format, it upended the way that items in categories such as Fagan's were returned in search results. Prior to Best Match, Fuji Arts items whose auctions were nearing expiration would be displayed in blocks grouped by timing, making a handsome catalog that gave the store an enviable visibility to shoppers. Following the change, Fagan describes the listings pages as "disorganized," where a search for Japanese prints would retrieve a slew of irrelevant and low-quality items such as T-shirts and tennis shoes with a Japanese image on them, color photocopies of a print passed off as a collectible, and remnant inventory sellers were trying to clear out.

"The category started to look like a messy garage sale, not a place to shop for collectible, rare antique art," he says.

What's more, Fuji Arts was socked with a new requirement that barred any one seller from presenting more than 10 items on a single page. As Fagan tells it, his store, with 1,000 of the 2,500 items in the category, was given scant representation on the first pages of prime real estate, while the bulk of the catalog was relegated to the wasteland at the end of the search results.

"Because of our volume in the category, after that rule was implemented we literally occupied every single item slot on pages 30 - 50. Their largest seller in the category was forced to the back, which to me was completely illogical," Fagan says. "We paid for those listings and we were getting negative placement based on the 10-item-per-page requirement."

The sales figures were dismal. But while Fagan had built his business largely on eBay, he and his team had also been developing a standalone Fuji Arts website.

"When our eBay business started to fail after Best Match, our website was just new and unknown, but it was up and running and completely built out," he says. "That was fortunate timing."

Fagan recalls coming into the office on a Monday morning in November, fresh off a weekend that had yielded another dreary take from eBay, but a healthy showing from the new website. At that moment, he determined that Fuji Arts would turn on its heels and focus on building the business through its own website.

That meant alternative methods of promotion, and Fuji Arts funneled resources into a low-cost, performance-driven Google AdWords campaign.

"When Best Match was implemented I told my eBay rep that I was going to take my eBay fees and spend them with Google. We did just that," Fagan says.

While he had braced for a yearlong transition as Fuji Arts weaned itself off of the eBay marketplace and built up its own website, Fagan says his business was able to pivot much faster than he anticipated. "Within 60 days," he says, "our eBay business was irrelevant."

Now, more than two years later, Fuji Arts spends between $6,000 and $8,000 a month on its AdWords campaign, compared to monthly eBay fees that ran as high as $13,000 in 2007 and 2008.

Last year, advertising costs accounted for 3.5 percent of Fuji Arts' gross sales, compared with the 10 percent to 13 percent Fagan says he was paying in eBay listing fees in 2007 and 2008.

Fagan boasts that Fuji Arts has flourished in its post-eBay iteration as the sprawling marketplace has become less hospitable to high-end niche categories and the serious client base they count on. Now, he says, the company sells 80 percent more items by volume as a standalone, with the average selling price up 40 percent. Fuji Arts grossed roughly $1.1 million annually before Best Match, with 85 percent coming through its eBay business. In 2011, the company is projecting sales of $2 million to $3 million.

"The more serious collectors on a bigger budget are not shopping on eBay. On a well-designed, quality website a seller can attract those bigger spending clients and increase the average sales price," he says.

While Fuji Arts currently spends 90 percent of its advertising budget on Google (and about $200 a month on the scant presence it retains on eBay), Fagan says he doesn't worry much about any adverse effect changes in Google's matching algorithm might have on his business. It's not a direct comparison, he says, given the tangle of considerations (DSR, buyer feedback, etc.) involved in selling on eBay. Crucially, though Fagan has met with Google account managers to discuss strategy, as an ad broker, Google does not insert itself into the relationship between buyer and seller, as Fagan found on eBay with his Top Seller Account Manager.

"Who is really in charge when (eBay is) so over involved in each seller's business? I am an entrepreneur, and giving up that independence doesn't mesh well with how I run my business or with my personality as a businessman," he says.

Fuji Arts also relies on other marketing channels, including direct mail, Amazon product listings, holiday gift and customer retention programs, as well as word-of-mouth referrals.

While Fagan has soured on eBay as a platform for a small retailer trying to build a thriving ecommerce business, he doesn't advise sellers already on the marketplace to "quit cold turkey." Rather, he counsels entrepreneurs who might want to strike out on their own to first ensure that their website is well designed and easy to navigate, a stumbling block for many small businesses. An easy litmus test for a seller is to shop his own site, looking at it through the eyes of a customer.

With the site in place, an ad strategy comes next. That could mean, as in Fagan's case, diverting eBay fees toward an ad program like Google's, which also offers a helpful free analytics program. And from there can begin a gradual transition toward independent selling, while taking care to ensure that customer service is, in a word, flawless.

In December 2009, Fagan's former eBay representative contacted him asking him to bring his business back, promising that some of the tweaks the company had made to its listings would help Fuji Arts thrive once again on the marketplace. They hadn't spoken in more than a year. Too little, too late, he thought.

"This was 14 months later. A small company like mine doesn't have 14 months to play around bleeding red ink while eBay tinkers with Best Match," he says.

"My rep was a nice person. But, I just rolled my eyes at that pitch to come back. We are gone for good."

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Fuji Arts Finds Life After eBay - May 22, 2011

eBay Best Match Search Sucked for Three Years - April 14, 2011

About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.

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