How to Fix a Broken Marketplace (eBay)

Image via Crunchbase

Image via Crunchbase

Do you still remember when eBay was a great place to buy and sell things? Today most auctions close without a single bid and very few are purchased at all. Most items are sold by “power sellers” which is really code word for businesses. Heck, most sellers are probably businesses at this point. As eBay discovers it isn’t recession proof and scrambles to become a primarily “buy it now” channel it needs to remember what eBay was.

eBay was the ultimate garage / tag / bizzare sale. For the first time ever people — consumers had an easy way to sell things to other consumers that didn’t involve putting up flyers and putting things out on your front lawn. eBay was the first global C2C marketplace. eBay’s purchase of paypal was genius and a beautiful marriage (unlike all of eBay’s other purchases… yeah we’re talking about you skype). The combination of eBay and paypal was great because now consumers which didn’t have the resources or need for a merchant account were able to conveniently charge other consumers credit cards. eBay provided the channel, tools and audience for consumers to become sellers and as a result grew exponentially.

With growth came more and more sellers. For a while it seemed to be untouchable. It was eBay’s audience that first attracted Business sellers, but not too far after eBay began a large campaign to attract them itself. Power User tools followed. eBay became a place where consumers were now competing with professional business sellers which bullied them on price and experience.  Where the banking industry has very strict requirements to obtain a merchant account which a business needs to accept and process credit cards, eBay has virtually none to sell using paypal. This attracted many seedier businesses who couldn’t obtain a merchant account. Further tainting the experience came the process of buying reputation and perhaps worse, the mob like approach of threatening consumers into giving a reciprocal thumbs up or the large seller would bury them with bad feedback. It because a david vs Golliath setting, ‘cept this time favor (eBay) was on Golliath’s side stacking all odds in their favor.

eBay wasn’t built with business sellers in mind and the interface is a clear reflection of this. In spite of this eBay and many 3rd parties provide tools for “power sellers” further separating them from the normal consumer sellers. On top of this, consider that the incremental cost for a business to list an item on eBay was small and the cost of re-listing an item was also small. Where the consumer needed to put forth a decent effort per item, the business seller had tools that sold items on eBay, Amazon and their storefront with assembly line efficiency.

eBay is still a 50 Billion+ giant and I would love to be doing as bad as eBay, however their sales are declining fairly rapidly, and the one marketplace that should be doing very well in this economy isn’t. The answer isn’t to shift to a “buy it now” model. The auction model is fine and works well. The problem is your model doesn’t match your marketplace anymore.

Here’s how you fix eBay. Partition it. Open a second website (not half.com) that is a B2C site. Since this marketplace seems to work better with a typical add to cart approach, make it a one and vet the businesses on the site. Compete with Amazon head to head. Return eBay.com to a C2C site. If you want to see how it needs to be, just look inward about 10 years ago. eBay did this impressively well.

Without a drastic change your value will keep dwindling. Your sales are down because all retail is down and you are simply a giant mall. It’s no longer true that I can find it on eBay. The consumers you desperately need to be your core sellers and buyers are still out there, they are just looking for a place to call home again.

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