In today's WSJ:
eBay Makes a Bid To Lure Lapsed Buyers
With Growth Slowing Down,Site Targets Clutter, Fraud
By MYLENE MANGALINDANOctober 12, 2007; Page B1
EBay Inc. is trying hard to win back people like Dawnn Eikenberry. An avid
online shopper, Ms. Eikenberry hasn't bought anything on the auction Web site
since she snagged a pair of Miu Miu boots in 1999. She has often returned to
eBay since then, but, overwhelmed by cluttered pages filled with countless
choices, she hasn't bothered to bid.
"It's too much work at the end of the day," says the Portland resident.
Besides, she says, she is nervous that she could end up with a counterfeit
item. For her, she says, "they're not a trusted retailer."
EBay, now a 12-year-old e-commerce company, is in the midst of changing its
site to lure back consumers -- particularly past customers like Ms. Eikenberry
-- who haven't shopped there regularly. With more than 241 million registered
users, the San Jose, Calif., company is running into a problem that many mature
consumer-goods makers have contended with before: how to get its already-large
customer base to buy again and more frequently.
To achieve that goal, eBay has been focusing more on the needs of the buyers on
its site, in addition to those of sellers who pay fees to trade.
It has tried to make its design simpler and its search results more precise,
adding criteria like size and color, so that buyers don't have to scroll
through so many items when they shop. To root out scams and low-quality
merchandise, it has added more-detailed ratings for sellers. It restricts the
selling privileges of lower-rated sellers or cuts them off entirely. EBay says
1% of sellers are responsible for 35% of the negative buying experiences on the
site.
When eBay began making the changes last year, it was still growing, but its
growth was slowing.
In the second quarter of 2006, revenue-growth rates in its U.S. auction and
marketplace business had declined to 20% from 27% the previous year.
The number of active users -- people who had bid, bought or listed an item for
sale in the last year -- had risen to 78 million, a 20% increase over the
previous year, but the rate of growth had slowed from the previous year's
increase of 34%.
The changes have rankled some merchants, who say they have lost business as a
result. After Kevin Harmon, a DVD and videogame seller on eBay, began selling
used merchandise along with his regular inventory of new products last year, he
received some bad ratings for damaged or defective DVDs and videogames. He says
eBay put him on its "watch list," notifying him that his sales would be
restricted if he didn't get his feedback ratings up in 60 days.
It took the Matthews, N.C., merchant five months to get off the watch list. He
improved his ratings by inspecting and repairing defective discs, doubling his
customer-service employees to four and giving full refunds to anyone who
complained of a defective product. While he is still on eBay, he also launched
his own Web site and started selling on sites like Amazon.
"There have been good, high-quality sellers who have been caught up" in eBay's
system of penalizing low-rated vendors, says Tom Mersch, an eBay
consumer-electronics seller and a director of an eBay sellers trade group
called Professional EBay Sellers Alliance.
These sellers, he says, "are certainly not part of creating a negative buying
experience on eBay."
John Donahoe, president of eBay's auction and marketplace business and the
driving force behind eBay's recent changes, says eBay is evolving to keep pace
with a more mature e-commerce environment.
While sellers will be given the same opportunities, he says, "we're going to
emphasize and reward our best sellers. The ones who aren't will deal with the
consequences or [receive] less exposure."
In mid-2006, Mr. Donahoe, who is viewed as a contender to succeed eBay Chief
Executive Meg Whitman, reviewed the auction business and decided it "hadn't
kept up" with the times, he says.
Late last year, he restructured his engineering, product and marketing teams
into groups focused on the customers' and sellers' experience.
To fight fraud, eBay put restrictions on sellers who wanted to sell items such
as luxury handbags, which are vulnerable to counterfeiting.
These sellers now have to be verified with PayPal, eBay's payment service, and
are limited in the volume of items they can sell.
EBay began displaying more-detailed seller ratings in March, with evaluations
from buyers on factors like shipping time and how closely the products matched
their descriptions.
In May, it introduced new technology to make search results more accurate. That
same month, eBay unveiled "bid assistant" and "eBay to Go," two features that
allow users to monitor bids on multiple items and to display and link to eBay
content from a personal Web site or blog.
Two months ago, eBay redesigned its home page to be less cluttered, cutting
down on the amount of text, images and scrolling headlines.
The company says it doesn't expect the changes to affect its financial results
right away. In the second quarter of 2007, revenue for the site's U.S. and
international auction business rose 26% to $1.3 billion, up from 22% a year
ago.
Gross merchandise volume -- the total value of all goods sold on the site --
rose 12% overall and two points for the U.S.
But the growth of active users, which hit 83 million in the second quarter,
continues to slow: It rose 7% in the second quarter, down from 20% in the year
before.
Listings declined 6% from the previous year. Ebay reports its third-quarter
results Wednesday.
The departure and diminished participation of some merchants on eBay could
result in a short-term drop in the company's revenue, since eBay receives a fee
every time an item is listed for sale and each time a sales transaction closes.
But some merchants applaud the changes.
Jarrod Krug, who sells designer shoes on eBay, has implemented the new "eBay to
go" feature, among others, to sell his merchandise. Already, he says, he has
seen visits to his listings and store soar by more than 30%.
Even though the Broomfield, Colo., entrepreneur has about 10% less merchandise
listed this year than last year, he has raised his prices and sales have
increased. Lizard-skin loafers, which he sold last year for about $150, now
sell for $200 or more.
Mr. Krug attributes the success to more affluent customers being drawn to eBay.
EBay has made his content more accessible to search engines like Google, so
more buyers can now find his products, he adds.
"The traffic does convert" into sales, he says.
The site has already won back Pookie Martin.
An eBay member since 1998, Ms. Martin has gone through long dry spells when she
hasn't bought much on the site. But she says she likes some of the recent
changes, such as a new feature that lets her contact other buyers about their
experiences with certain sellers.
Recently, in a flurry of activity, Ms. Martin loaded up on clothing, shoes and
children's bedding on the site.
"Being able to network better with people in the community made me feel better
about buying on eBay," she says.
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