January 23, 2009, 12:00 AM

eBay woos big-box retailers, but is it working?

EBay’s quiet move last year to establish a program to attract large retailers was meant to draw in more buyers by adding extensive inventory and top quality customer service to the e-marketplace, but the program has yet to boost sales or traffic.

Ebay Inc.’s new management team has made sweeping changes to turnaround slipping sales and traffic. One less-publicized move was last year’s relatively silent launch of a new top tier Diamond Seller program. The category, unofficially designed for merchants that sell upwards of $500,000 a month, offers special fee discounts to large, reliable sellers who offer extensive inventory.

Stephanie Tilenius, senior vice president and general manager for eBay North America says Diamond merchants pay no listing fees and commissions charged after items sell are negotiated on a case-by-case basis. Online electronics and general merchandise retailer Buy.com and off-price e-retailer SmartBargains.com are among the first members of the exclusive club.

Neel Grover, president and CEO of Buy.com says it lists on eBay about 1 million products of the 4.5 million items on its own e-commerce site. “It’s all priced the same-it’s our A-stock merchandise,” Grover says.

The program, however, has yet to drive sales or traffic. The amount of merchandise excluding vehicles sold on eBay in the fourth quarter fell 12% to $11.47 billion from $13.10 billion, eBay announced yesterday.

Buy.com, which doubled its customer service staff in anticipation of growth in sales from eBay, has yet to experience big returns on its eBay investment, Grover says. “We went into this expecting pretty big results,” he says, “and I think long term it will be a good, beneficial relationship.” But, he adds, “…we are still scratching the surface of selling on eBay.”

One of the problems could be that eBay doesn’t seem to have quite figured a way to market such retailers. Today, Buy.com is listed as an eBay store called Buy and stands alongside thousands of other stores of various sizes.

“The overall benefit of what shoppers get with the Diamond tier and the advantages of such merchants could have some branding around it,” Grover says.

EBay and Grover say attracting larger merchants will create good experiences for buyers, which in time will help all sellers on the site by building consumer trust. But the program is irking long-time sellers, and numbers show some are leaving. The number of stores on eBay fell 3% in Q4 to 516,000. And, eBay merchant groups are speaking out against the program.

“We would like to highlight eBay’s recent move to allow "big box" retailers free access to eBay, at a competitive advantage to its existing seller base, as an example of a decision that exacerbates the situation by threatening the diverse supply of merchandise that shoppers expect on eBay,” the Professional eBay Sellers Alliance wrote in an open letter in September about its frustrations with the marketplace. “Based on recent feedback from PeSA members, merchants are focusing on other channels at higher rates than we have ever measured in the past.”

In addition to the Diamond tier, eBay introduced in November another tool to help big merchants, a Large Merchant Services application programming interface. The service makes it easier for big merchants to process large numbers to transactions through eBay, manage SKUs they sell on the platform and consolidate thousands of requests, or responses into one compressed file.

EBay doesn’t deny that it is focusing on driving more fixed price listings-the type of listings that come from big-name merchants. Consumers prefer the format over auctions because it’s faster and easier, eBay says. “We`ve augmented our fixed price offering and altered our model to better support fixed price sales,” an eBay spokesman says. “In essence, we`ve adapted with the needs of our customers,”

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