Tag : culture

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167: 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

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