312: 4 Marketing Trends Driving eBay’s Auction Decline

In my 16 years in the auction industry, there’s been a healthy debate as to whether or not eBay has been a positive force in the auction community—and even whether it should be considered part of the auction industry. The company that now sells more than $2 billion in assets per year has also led to multiple discussions as to what the definition of an auction marketer actually is.

ebay Revenue

Those on both sides of the debate, though, have noted that the eBay marketplace isn’t as focused on auctions as it once was. The National Bureau of Economic Research released a white paper that studied the trend of eBay sellers moving away from the auction method, while still leveraging the site’s marketplace. They found that over a span of a decade, auctions fell from 95% to just 15% of eBay’s share of active listings.

eBay Shift Chart

The authors of the study concluded that:

  1. The auction method of price discovery was losing importance because of the robust search capabilities available on the Internet.
  2. Seller margins were dropping significantly, as auction prices had fallen dramatically compared to posted-price sales for similar assets.
  3. Auctions “are favored for used and idiosyncratic items, and by less experienced sellers.”

It’s important to note that eBay wasn’t pushing these trends. They make money on the transaction regardless of method of sale, and they want items to sell for the highest price possible. These trends are adaptations of sellers to the marketplace’s buyers. That’s why these trends should be instructive to all of us who sell things for other people—no matter what method of marketing we use.

We have the most educated buyers of all time.

Buyers can research more about the asset you’re selling than at any time in history. So, it’s important to disclose as much information on our website as possible—and not force buyers to on-site inspections or phone conversations. We need to publish lots of pictures or even videos—and all the documentation and description possible.

We need to give buyers options.

eBay offers four ways to buy: fixed price, reserve auction, absolute auction, and Buy It Now. We need to know what method works best for our various asset categories and their respective marketplaces—and be able to articulate the pros and cons of each to our sellers. Some real estate auctioneers I serve already advertise a Buy It Now-style option on their auctions; and I know of at least one equipment auction company researching that feature on their online bidding platform. Regardless of the method we use, we need to compliment it with robust, targeted, efficient advertising that adds value to that method (something eBay doesn’t do).

We need to retire “Auction is fastest way to get cash for your asset.”

One of the reasons for eBay’s auction decline that wasn’t mentioned in the white paper is the instancy of purchase available on the Internet. Culture has blown past even one-click ordering to the new Dash buttons for buying items. While these obviously wouldn’t serve the asset categories we typically market at auction, we need to understand that auctions aren’t always the fastest way to buy—and thus not always the fastest way to sell.

The marketplace should drive our marketing decisions.

If eBay had determined to remain an online auction company rather than an online marketplace, it would be generating a fraction of the revenue it does each year. Instead, it adapted to buyer trends to benefit its sellers. That wasn’t an altruistic decision, and I’m sure that cost them a lot of time and resources to accomplish. If our companies are to continue and grow in their success, we must adapt to the culture. We have to ask questions like:

  1. What media do our buyers and sellers most consume?
  2. How do they consume that media and each medium’s advertisements?
  3. What do the terms and purchase processes look like where people most often purchase the asset in question?

None of our companies will ever be eBay. (I would guess that most of us don’t even aspire to that.) What works for eBay may not work for most of our firms, but we can learn from the trends that their scale and ubiquity illustrate. If their sellers are adapting to cultural changes, we need to help our sellers do the same.

Stock image purchased from iStockPhoto.com

eBay revenue charted linked to its source.

eBay auction chart acquired from the referenced study“Sales Mechanisms in Online Markets: What Happened to Internet Auctions?” by Liran Einav, Chiara Farronato, Jonathan D. Levin, Neel Sundaresan

3 comments

  • Lucy "Lucypetunia" Brainard

    I love Ebay. I hate Ebay. I bought my first Ebay item in 1995. Back then it was just plain fun. Now, I can still get some great buys, but it’s just no fun at all. It’s been sad to see Ebay evolve from a marketplace of individual sellers with unique merchandise to one with large businesses who…like WalMart…make it almost impossible for the little guys to compete. C’est la vie! I don’t think the percentage of auctions has decreased because the auction format is unpopular among individual selelrs. I think it’s decreased because the seller population has become largely populated by businesses who are on Ebay for profit, and to ensure profit items must have a fixed price.

    I own a consignment store selling “gently used” furniture and home decor. I can’t count the number of times a consignor has brought an item to me and proudly announced “I bought it 20 years ago for [insert large dollar amount here]. It has a book value of [again, insert large dollar amount here]. I’d like to get [ dare it say it…insert large dollar amount here] for it.” I tell them we can’t begin to meet their expectations primarily because Ebay has KILLED the collectibles market. Some understand and grudgingly leave their item(s) to be sold at a price significantly lower than the original purchase price. Others look at me like I have two heads and leave insulted. It’s hard for many to concede that the once highly priced, highly collectible item is only worth a fraction of the original price/value today. Yes, there are still people – mostly older or elderly folks – who don’t consult the web to compare prices before a purchase & will pay more. But as those generations pass and today’s youth age, there will be few, if any, who don’t shop primarily online after first making a thorough, online cost comparison. It will be fascinating to watch what becomes of all those big (and small) box retailers as online sales continue to replace brick and mortar sales. Loft apartments? Homeless shelters?

  • Roscoe Putnam

    I have been an eBay seller (and buyer) since 1999. When I began, it seemed whatever you listed for sale ~ a half used bottle of shampoo ~ got a bid in no time and whatever you threw up there to sell had a good chance of being sold. Little “flames” let you know you had a hot item and people used to mail you a postal money order when they had no idea of what PayPal was. As time evolved, I had to bend with the learning curve and find that there are categories that would remain strong through just about any economy. Thank goodness these fit into what I enjoyed hunting for and could easily pick in my neck of the woods. I saw the rise and fall of the new and edgy eBay stores, a few surviving and thriving and making me envious, but I remained happy picking my antiques and oddities and keeping it simple. Will it ever come back to the roaring early 2000’s, where everyone was having a ball listing their childhood toys, their mother’s china and starting a small business doing listings for friends and neighbors? I doubt it. eBay has changed the world and we have to change with it. Thanks for what you have done and no thanks for what you have done. The knife cuts both ways. What I made money selling 16 years ago because it was uncommon is now common today because of what eBay has done, allowing everyone to sell something for 99 cents.

  • Marty Rogers

    Interesting post Ryan, as you know we have moved tentatively toward “structured sales” and away from strictly auctions with a good deal of success. What I found interesting in the data was the timing of the pretty dramatic decline in the use of auctions at eBay. January 2009 appears to be the turning point and what was happening in our economy in January of 2009? For one, we had a new president but probably much more important we were fully inthralled in the great recession. Does this fact have anything to do with the sudden down turn in the use of auctions at eBay? Maybe but if it did the trend has not reversed with better economic conditions. Sometimes we are forced to discover a new way of buying or selling due to economic factors and as a rule we don’t like major changes unless we are forced to do so. Thus will auctions come back into favor? Maybe, but probably not without a large kick from the economy or other outside influences. IMHO

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