|Thu June 11 2009 23:21:29|
eBay CEO John Donahoe Wants Costco Bargain Hunters
By: Ina Steiner
John Donahoe spoke at the Reuters Global Retail Summit in New York today, where he equated bargain-hunting on eBay to shopping at Costco. Costco is the largest membership warehouse club chain in the world based on sales volume and is the fifth largest general retailer in the United States, according to Wikipedia.
Donahoe said, "Does going into a cement warehouse pushing a bin, does that hold up in a world where retailing is becoming more and more sophisticated? I would say Costco's growth numbers indicate that it does," Donahoe said. "Because people want a deal. And actually you can build brand loyalty ... around having a deal."
However, is eBay really positioned to succeed in the Secondary Markets, given it doesn't take possession of inventory (and at this point, doesn't have a shopping cart or process orders on behalf of third-party sellers)?
Liquidator marketplaces such as Overstock.com and uBid buy their own inventory in addition to offering drop-shipping and third-party sales. In an interview I did last month with uBid's Jeff Hoffman (CEO of Enable Holdings), he said being able to take inventory positions is a big advantage.
Donahoe believes eBay can compete on price to keep shoppers coming back - but it has no control over inventory or prices and must rely on its sellers, who have to factor into their pricing the cost of selling on eBay, including commission fees and higher CRM costs. Does the math work, and is eBay putting (most of) its eggs in one basket?