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eBay decides to take on Overstock instead of Amazon
eBay yesterday outlined a strategy of focusing more on selling excess and out-of-season inventory. The company is backing off competing with online retailers of in-season merchandise like Amazon, analysts say.
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It’s been a common refrain for the past couple of years that Amazon.com Inc. is growing much more quickly than eBay Inc. Now eBay appears to be moving away from directly competing with Amazon and other e-commerce sites that sell the latest merchandise, instead focusing on selling the kind of excess and out-of-season merchandise more likely to be found on Overstock.com.
That was a key strategic shift eBay executives outlined yesterday as they presented a three-year company roadmap in an unusually detailed briefing session with analysts. In summarizing that plan, eBay said its core Marketplaces unit “is more aggressively targeting the $500 billion global ‘secondary’ market, which includes liquidation, out of season, excess and off-price inventory. We believe this is a fast-growing segment uniquely suited to eBay’s strengths.”
Citigroup analyst Mark Mahaney noted that this secondary market is more limited “than the broader online retailer market that eBay management has previously guided for. We view this as eBay correctly recognizing the limits of its value proposition in the in-season retail segment.”
That strategy suggests eBay will be targeting larger enterprises and retailers to sell excess inventory on eBay, says analyst Colin Sebastian of Lazard Capital Markets. EBay already has been experimenting with promotions designed to drive sales of larger volumes of a single product, including a deal of the day site that in some cases has enabled retailers to sell 5,000 units in a single day, says Scot Wingo, president and CEO of ChannelAdvisor Corp., which helps retailers sell through online marketplaces like eBay and Amazon.com. EBay owns a minor stake in ChannelAdvisor.
EBay also played up the potential of its PayPal unit, which provides the PayPal online payment system and also processes payments on behalf of off-eBay online merchants. “We expect PayPal to become the next leading online global payments network,” eBay president and CEO John Donahoe told analysts. Look for eBay later this year to make a major push in payments after integrating PayPal with the Bill Me Later credit product eBay acquired last year, Wingo says.
Sebastian noted that eBay plans to improve the buyer experience with improved search and product pages and steps to improve buyer confidence, including improved problem resolution services to top shoppers.
EBay’s steps in the past year to cater to shoppers have angered many eBay sellers who believe the new rules put them at the mercy of buyers. Yesterday’s presentation did nothing to mollify John Lawson, a high-volume seller on eBay through a store called 3rd Power Outlet and operator of the e-commerce blog ColderIce. “Last year they said they were going to change eBay, they changed it and it didn’t work,” Lawson says. “They’re doing the same things they did last year that did not work.”