EcommerceBytes-NewsFlash, Number 3073 - May 27, 2013     1 of 4

eBay Auctions Declined Due to Inconvenience

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eBay management has been downplaying the auction format for many years now in favor of fixed-price listings. New research released this month says the "dramatic shift of internet retail from auctions to posted prices" is primarily due to a decline in the relative demand for auctions.

What's driving the decline in auction demand? A change in preferences toward convenience shopping rather than increased retail competition, according to the research.

The National Bureau of Economic Research (NBER) released the working paper from Stanford researchers this month titled, "Sales Mechanisms in Online Markets: What Happened to Internet Auctions?" They study eBay data from 2003 to 2009. "Data from eBay shows that compositional shifts in the items being sold, or the sellers offering these items, cannot account for this evolution. Instead, the returns to sellers using auctions have diminished."

The researchers addressed changes eBay made that might have influenced the decline in auctions, but conclude that eBay made the changes in reaction to what was already taking place on its marketplace:

Our analysis emphasized changes in the marketplace incentives facing sellers. There also have been some changes in eBay's platform that may have favored posted prices, especially beginning in 2008. In February 2008, eBay changed its search ranking algorithm. Rather than putting the soonest-to-end listing at the top - a natural strategy for auctions with a fixed ending time, but less natural for posted price listings - it implemented a relevance ranking.

"Then in September 2008, eBay allowed 30 day posted price listings to be "rolled over" with automatic payment of the monthly listing fee. The mechanical effects of that change help explain the sharp concurrent rise in active posted price listings that can be seen in Figure 1. However, given that posted prices already had been on the rise for several years, it probably makes more sense to think of these platform changes as a response to changes in the market, rather than the impetus for evolution of sales format."

The study seemed a bit of a throwback to the days when economists were often coming out with new research about online auctions on eBay. What might be more fascinating these days is research into dynamic pricing on Amazon, where you might think prices are fairly static, but that's not the case (as anyone who has ever received a notice from Amazon of a price drop is well aware).

The authors of the study wrote, "In the early days of the internet, many observers speculated that technology would shift retail markets in the direction of more dynamic and flexible pricing mechanisms," and said, "Today most online commerce takes place at posted retail prices,..."

Thanks to repricing tools - fueled by sellers' desire to win the sale and shoppers who use mobile devices to compare prices wherever they happen to be - pricing is in constant flux.

You can read the working paper NBER.org website (in PDF format).

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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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