How to Compete without Self-Destructing

EBay has been trying to become like Amazon, and in the process, has ruined its own platform. Once upon a time, Amazon tried to compete with eBay. Amazon's bid to enter the online auctions failed, but Amazon did not destroy its marketplace in the process. In this post, I will discuss what Amazon did right when it tried to compete, and what eBay has done wrong as it has tried to compete.

The buying experience on eBay has gradually deteriorated in the last three years. This process began when eBay took the inventory from eBay Stores and placed that inventory into the core search results in February 2006 according to Scot Wingo in his eBay Strategies blog. Scot wrote, "Thus, a seller paying $2 for an auction listing had the same exposure as a seller that paid back in that time .05 or less for a store listing. You can imagine what happened - sellers left the auction format and bulked up on store listings. By March, eBay turned this off, but they had started in motion a severe debalancing of the marketplace that their subsequent actions to rectify actually amplified to the downside as far as selection is involved."

Even though eBay removed the stores from search, the trend to fixed-price listings had begun, and eBay had caused it. The trend had nothing to do with buyers wishing to purchase at fixed-price; people still loved auctions, but sellers began to list at fixed-prices. It became much harder to find items in search. The quick removal of store results from search caused store owners to feel slighted, and rightfully so. It is back to this event that the strong anti-eBay attitude of many sellers can be traced.

Since early 2006, eBay has gradually raised auction fees and enforced new policies that have driven sellers away from auctions and towards fixed-price listings. EBay has caused its own ruination, yet blames the market and buyer attitudes.

Back in March 1999, Amazon launched Amazon Auctions in an attempt to compete with eBay's auctions. Amazon sunk a large amount of advertising dollars into its auction campaign. I was one of the people who temporarily quit selling on eBay to sell on Amazon Auctions. I have fond memories. Because of the large amount of advertising, Amazon's auctions were very successful for around six months to one year. I remember getting very good prices for books—higher prices than I would have seen on eBay during that time.

In September 1999, Amazon launched zShops, in which individual sellers could list fixed-price items. Amazon's homepage was set up differently at that time than what it is now. I found an archive of Amazon's homepage from late 1999 in the Internet Wayback Machine. Here is a screen cap:

Along the top of the page were tabs for the different parts of the Amazon website. At the end were two tabs for Auctions and zShops. By keeping the auctions and zShops separate from the other parts of the site, Amazon did not risk compromising the success of its entire marketplace. Ultimately, Amazon quit advertising its auctions, and the auctions and zShops were discontinued due to lack of interest and sales. Since the auctions and zShops never commingled with the rest of Amazon's products, their failure did not affect the rest of the marketplace. Amazon tried to imitate eBay and failed but emerged without damaging its core value.

EBay's mistake was to place the fixed-price and store listings in with the auctions. EBay should have tried an approach like Amazon did by having links to the stores and fixed-price items prominently featured at the top of each page along with the rest of its tabs to important sections of eBay. EBay could have better advertised the stores without damaging its core auctions. If eBay had tried Amazon's approach, perhaps so many of us would not be so dissatisfied with the direction that eBay has taken.