Saturday, September 29, 2007

eBay - King of the Hill

Do you remember as a child when you played "King of the Hill?" How much fun was it to beat everyone else to the top. I can still feel the excitement as I pulled myself up that hill ahead of everyone .

But, once you were the King, and everyone else was trying to pull you down, it wasn’t nearly as much fun. I think that is where eBay is at the present time. They are in a position of having to defend themselves from newcomers.

I have been using eBay almost since its inception, and their changes have been in the process of capturing more and more of the market each year. This has been accomplished through acquisitions of their competitors and by an increase in their fee structure.

This has proven to be very successful for the company, but now, they are seeing new competition on the horizon. Companies like "" have introduced the no listing fee format, and it is catching on. Why should this matter?

I believe it matters, because in my humble opinion, the number of unfinished listings, meaning sold listings, will be eBay's undoing, unless they change their policy. The sellers will soon realize that they are losing so much money on uncompleted sales in listing fees, that it can’t be made up by the profits on their completed sales. eBay has tried to combat this by encouraging the sellers to list their items without reserves, so that most of the sales will be completed. This, however, puts the seller at a disadvantage, because they can’t protect their items from selling at a price that isn’t acceptable to them. The way eBay has encouraged this is by making the reserve price too expensive to use.

So, I've been thinking about this, and have some thoughts of my own. Call them my predictions, if you want, or just one man's opinion. But, I believe eBay offered the month of September with no listing fees to see if the increase in final value fees would offset their losses in listing fees. I think eBay will soon eliminate all listing fees. Why? For months now, they have been inching up all of their other fees, the ones outside of the listing fee itself. Things like gallery photos and listing style fees just to name a couple. Their other service fees, such as PayPal, Pro Stores and eBay Stores, have also increased. If they can maintain their profit margins, without charging a listing fee and increase the number of listings, I think this will give them what they're looking for.

This would be a huge blow to other companies trying to compete. I am not sure that other companies that have chosen this route could survive. And, eBay can’t continue to increase their profits each month, if competition offers the seller and buyer a better deal. So the only solution for them is to make it unprofitable for their competitors, because of their dominance in the market place.

My next thought is about why eBay has a "sign in" for the completed sales section. You see, I believe, and I'm going to make another prediction here, is that they are considering charging for their archives service like Ask Art, ArtPrice, ArtNet and Priceminer.

I stated in one of my early blogs that the market will always find a way to correct itself, and the companies that are in control will either change or be replaced by others. We'll see if this play out in the coming months.

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