Thursday, February 14, 2008
eBay's new fees
A couple of comments on eBay changing their fee structure and the ensuing user outrage:
- The network effects of the online buying and selling market are huge; if all firms offered the same fee structure, only one firm would survive. Once a site got a few more people, it would be more profitable to sell there since there would be more bidders, which would attract more sellers, which would attract more bidders, etc. That's why all of the fledgling auction sites from the late 90s went by the wayside-- it's not about offering a lower price, it's about attracting the most people...and only one place can attract the most. A move like this would have meant death in 1999, so I'd say eBay's decision reflects its knowledge and comfort with its place in the market.
- That being said, a large enough shock to the fee structure could make it impossible for someone to sell at a profit at eBay but for profit somewhere else. In order for that to happen, though, you're going to need a lot of buyers to jump ship along with the sellers; otherwise, they're going to lose even more money at the new place because even though the fees are lower, the final prices aren't as high. Traffic is the name of the game in auctioning-- the more, the better. I just don't see that happening-- that's a massive coordination problem. I know the talk of a one week strike is an attempt to move down that path, but it's not focused on the buyers, it's focused on the sellers. They could try to act as a group and all move, and let it be known to the buyers where they are headed...first mover problem, anyone? Collective action problem, anyone?
- I am surprised at the modest success of the fringe/specialty auction sites that I've been reading about in the eBay stories. Then again, I nor many others hadn't heard of them prior to the story...that might be a problem in the long run. Maybe they can operate on a smaller scale and serve a dedicated niche.
- Was I the only one that found the threat of not selling for a week mildly humorous? Let me get this straight-- you're not going to sell for a while, but you're not going to leave, and while you're not selling you're hoarding your goods to sell when you decide to jump back on? A commitment to sell goods on another site for a week would have been more effective, but the funny thing about profit motives...
- Based on that, why didn't an emerging site offer to list every good from an eBay seller for free during that week? It might not work out, but the traffic would go up, and if you could get enough buyers to head over there (and the sellers, I'm sure, would be very active in letting previous buyers know about this) you might get the ball rolling. Maybe someone has; I'm out of the loop on this.