How does EBay’s auction business slow towards recession?

Ebay’s sales have slowed due to their policy changes, not the recession. Ebay SHOULD be booming in a recession, it’s a source of cheap second hand items at a time when people are starting to look towards those kind of savings.

Ebay EU recently moved towards alienating small personal sellers by making their listing fees and cut of final profits (not to mention their cut on Paypal which is now MANDATORY) so high that personal sellers can make no profit unless they sell items above £20. Although well hidden, this has caused a mass exit of many sellers who would be selling just the kind of thing buyers are currently looking for.

You’ll notice Ebay offering many “free listing” weekends recently, no doubt an attempt to lure those sellers they alienated back, althouygh temporary. The big boys they wanted to lure in are selling at highstreet prices….plus P&P. Ebay’s problems are due to greed and a bad business policy, they’re reaping what they sew.

Ebay’s problem has little to do with the market downturn. Had Ebay management not been manipulating listing numbers for many months the trend would be more obvious. I’m betting that management views this economic crisis as a wondrous, beautifully timed, super dooper scapegoat.

Since 1997 Meg Whitman has duped Wall Street into believing she is responsible for Ebay’s success.

The truth is that the success of Ebay was the result of a new idea at the right time, recognized and capitalized upon by millions of entrepreneurial, hard working sellers. A chimp could have done Meg Whitman’s job. (Even crediting her for buying Paypal is an exaggeration because it was such a no brainer. My market knowledge is quite limited but when Paypal went public I was advising anyone who would listen that they should buy in — yet Whitman continued flogging Ebay’s failed BillPoint for another year.)

While Meg was bowing and Ebay was hyping Jesus sandwiches to the press, millions of sellers turned Ebay into their primary revenue source. Who were those sellers? Many were the early victims of today’s economic situation, workers laid off when their jobs went overseas. Others were the disabled, pensioners and home schooling moms. Many were independent retailers who saw selling on Ebay as a way to offset shrinking sales resulting from mushrooming strip malls and web competition. A majority of sellers were part timers, but for several million, Ebay was a fulltime occupation that at one time produced a decent income.

Sellers on Ebay are the goose that’s been laying the golden egg since 1996. Unfortunately, Ebay management become so enraptured with its tale of its own brilliance that they thought they could afford to batter and bleed that goose, constantly and forever.

While fees and seller frustration soared, seller profits plummeted. Sellers saw their higher fees go to pay for Ebay’s failed attempt to conquer the China market, and for never ending software changes at the Ebay site that left behind a trail of bugs and program malfunctions.

Sellers saw their fees used to staff programs geared to prevent sellers from selling an item off Ebay, but never toward hiring enough staff to handle the self policing Ebay claimed to endorse. (Ebay is obsessed with the idea of 2 parties who connect on Ebay engaging in a transaction without Ebay getting a piece. Ebay claims their concern is for buyer safety, which sounds good at first glance but I’ve noticed that whenever Ebay imposes a policy that cuts deeply into sellers pockets, violates the Bill of Rights, or makes it harder to do business, Ebay always claims it’s for security reasons. Most of their forest-sized lies started with a kernel of truth and all too often the kernels were stamped SECURITY. Ebay’s next gambit is going to be to withhold email addresses until a transaction has taken place. Again, they’ll lie and claim it’s for security but the truth is that they want a piece of every dollar that trades hands on the internet and view ending communication between sellers and prospects as part of that plan. In the Ebay corporate ethic exists an undercurrent that is petty and miserly, in total opposition to the rainbow colored logo and cheerful TV commercials presented to the public. That mean spirited attitude arrived with Meg Whitman and I don’t expect her hand-picked & groomed replacement to change it. In the head of Meg, Inc, Ebay sellers are prey.)

Selling on Ebay today is filled with anxiety. One misplaced word in a listing can result in suspension and loss of livelihood. If that happens, there is no recourse, no reprieve, your family goes hungry, Ebay’s not answering the phone, sellers are totally at Ebay’s mercy, an oxymoron to be sure. Ebay demonstrates on a daily basis that their promotional babble about respecting people is hooey.

So thousands of sellers, despite an uncertain market, are going elsewhere to sell, choosing even burger flipping to enduring any more of Ebay’s dishonesty and insults.

Few in the financial press have dared to point out that Ebay’s behavior is irrational but I suspect that as Ebay’s stock continues to falter (despite Ebay being in a unique position to capitalize on the recession), some will begin trying to understand what is really going on at Ebay. And when they do, one of the first questions that should arise is: What other company sneers at a customer base of two million “dealer customers” who are willing to invest thousands of dollars and work 60-80 hr weeks? Can you imagine the CEO of GM describing angry dealers as “making noise”? That’s how Ebay’s CEO Donahoe refers to Ebay’s sellers. Can you imagine TupperWare or Mary Kay refusing to talk to two million eager would-be sellers with cash in hand? How many franchise sellers would like the opportunity to show Ebay’s sellers what it’s like to be treated with a smidgen of respect?

I dismiss Ebay’s explanations for its behavior. They’ve lied too many times about too many things. So here’s my theory, an amalgamation of observations and reading. I think Ebay postures as a profit-drivin company but is in fact driven primarily by ego. Meg Whitman and Donahoe sneer when they say the words, “flea market.” They have an appetite for Sotheby’s but the Ebay marketplace keeps behaving like a flea market. Shudders!

And their egos are particularly troubled by that upstart Amazon selling more books and CDs. To the techies & MBAs, it’s not a business, it’s a a big video game that they get paid to play. Whoohoo! They desperately want to go head to head with Amazon. Like an angry little brother chasing after the Big Boys, they’re sure they can win, if they can just get the damned sellers out of the way. Would be so much easier if sellers would just pay their fees, give away the merchandise, ship for free and shut up that noise.

In short, I think senior management at Ebay is allowing the Whiz Kids to destroy the company. You investor folks are supposed to keep buying in until they run out the clock. When done they’ll walk down the street to a different job, leaving several million families without an income. The only difference between them and the cockroaches that recently came running out from under a rock on Wall Street is that the ones at Ebay are a bit younger.