|Wed June 25 2014 15:55:44|
Are Online Auctions Really in Decline?
By: Ina Steiner
We often receive inquiries from analysts, researchers, and even students about industry issues, and this week I received an email from an analyst doing research on the online auction market. She wanted to know more about our reports that auctions were declining in favor of fixed price.
eBay auctions certainly are declining as a percentage of total Gross Merchandise Volume - they made up 70% of eBay's business in 2008, and auctions now account for less than 28% of total GMV for its Marketplaces business. (eBay shares numbers in its quarterly financial filings for those who wish to dig in deeper.) But it's important to note that since 2008, eBay has promoted fixed-price items and used various levers to tip the scales heavily in their favor, so the decline of auctions is not completely an organic development.
But even before that, auctions on eBay were on the decline. As we reported last year, the National Bureau of Economic Research released a working paper from Stanford researchers that showed a steady decline in auctions on eBay from 2003 to 2008, and then a more dramatic shift downward from 2008 to 2011 thanks to eBay's actions to promote fixed-price listings.
eBay has told Wall Street analysts that it doesn't want auctions to increase as a percentage of its business, but it doesn't want it to decline either. But auctions did decline 9% in the first quarter of 2014.
As a result, eBay changed its fee policy effective May 15th to encourage more listing in auction-heavy categories, as previously discussed on the EcommerceBytes Blog. There are other auction marketplaces as well as live-auction platforms, but growth numbers for those markets are hard to find.
Auctions are ideal for items where it's difficult to place a value, such as unique and rare items. But unlike the early days of online trading, it's much riskier to start the bidding low. This topic came up Monday in a letter from a reader who reported receiving recommendations from eBay that she start the bidding for her auctions for very low starting prices.
Now that eBay is encouraging more auctions through its May 15th fee change, are sellers listing more auctions? And if so, are they listing for retail prices, or are they starting the bidding low, as eBay would like?
What is the fate of online auctions on eBay and elsewhere?