April 1, 2009, 12:00 AM

Recognizing its limits, eBay refocuses on selling excess merchandise

As eBay struggles to return to its stronger annual growth rates of prior years, it has backed off its strategy of competing against full-service, new products retailers like Amazon.com to focus on selling excess and out-of-season merchandise.

Though still a powerhouse in online retailing, eBay Inc.’s phenomenal growth has tapered off in recent years as online shoppers flocked more to full-service retail sites like Amazon.com. After taking some steps to compete in Amazon’s space, eBay has backed off that strategy to concentrate on selling excess and out-of-season merchandise-the kind more likely to be found on Overstock.com than on Amazon.

In a conference call with stock analysts last month, eBay executives presented a three-year roadmap under which eBay’s core Marketplaces unit “is more aggressively targeting the $500 billion global ‘secondary’ market, which includes liquidation, out of season, excess and off-price inventory-a fast-growing segment uniquely suited to eBay’s strengths.”

Citigroup analyst Mark Mahaney notes that this secondary market is more limited “than the broader online retailer market that eBay management had previously guided for. We view this as eBay correctly recognizing the limits of its value proposition in the in-season retail segment.”

The new 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.


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