Until now a lot of the discussions in this forum have been about the present situation of Ebay members. The general idea seems to be to take stock of the situation, set an agenda and to present this to Ebay in order to effect certain positive changes. But I think we also need to use this opportunity to discuss whether or not Ebay actually even has a real future.
Even the most seldom visitor to this forum knows: turnover rates for many members are down and profits in the last few months have also taken dramatic cuts.
A common question is “Where have all the good customers gone?”
In order to answer this question it’s important to look at the roots of the company. Ebay, which used to be known as Auctionworld, was conceived from the very beginning as an auction house. The first step was made by the rare collectibles market which was able to find buyers through this new channel of business. In the past sellers and collectors had to go to conventions or shows – often thousands of miles away – or they had to sell through live auction houses and thereby count on paying massive fees. The genius of the Ebay model was that all of these sellers were able to, through this new channel, spare themselves massive costs. This fact made the rounds quite quickly. And what started off as a small clan of Pez collectors soon opened up to people coming in from all parts of the collectibles, antiques, and art markets. And then, just as quickly, we had dealers of used articles of almost every kind. Newspaper articles at this time featured some very self assured quotes out of Ebay management circles: “A monkey could drive this train.” (Fortune, 11. August 2003, Adam Lashinsky.) No wonder: the idea behind the business was so ground-breaking that it seemed like it would revolutionize the global auction market. Today, some years later, there is not much left of this vision. In the last few years the management has mainly concentrated on improving the technical functions of the site, expanding worldwide (mostly done through the takeover of already existing similar sites), winning over new members, and constantly honing its unprecedented self-glorification in the history of economics. Initiatives to take care of buyers basically are rare. Whenever in the past there were bidders who had been cheated we would hear, “We’re just a venue.” They always acted as if they favored sellers who allowed themselves to become completely financially dependent on Ebay, but at the same time we would hear about a “principle that at Ebay all users are held to the same conditions: the private person who is there for the very first time just like the powerseller.” (Fr. Interview with Philipp Justus, managing director of Ebay.de in Tomorrow, January 2004, pg. 41)
These principles, “We’re just a forum” and “All sellers are treated equally” are IMO essentially the Achilles’s Heel of the company. Let’s look back at the golden age of the US tobacco industry when about 20 years ago a couple of people brought the first lawsuits against these giants of the US economy. Back then they were given slim chances of success. The tobacco industry defended itself mainly with two arguments: on the one hand nicotine was not addictive (at least according to the legendary 7 “dwarves”, the bosses of the seven largest tobacco companies, 1994 in front of Congress) and on the other hand people smoke of their own free will. However, in the following years the term “free will” was relativized by the court system. The tobacco industry can no longer use this as an argument, because of their remarkably aggressive advertising which we are confronted with every day which was said to have deliberately led people into addiction. Once led to the consumption of the products, the victims were not able to free themselves from the habit. The industry therefore is given a massive share of the responsibility for the health problems of the smokers.
Do you see any similarities to Ebay?
We ask ourselves, “Where have all of the good customers gone?” Let’s look at this from the point of view of the buyer. John Doe is looking for a present for his darling wife. He reads a couple of the hyped-up articles about Ebay which have been written recently. Evenings in front of the TV he sees another one of their big expensive commercials. Finally John hears from a friend that he “just yesterday” made an awesome deal on Ebay. Full of expectation he goes to his computer and gets registered as an Ebay user. After a short search he finds a fitting present, he bids, and sends off his money to the seller. Some weeks later – he’s still waiting for his purchase to arrive – John complains and to his disappointment finds out that in the meantime the seller has been deleted from Ebay. And then after a little research he finds out that he’s been conned. Ebay states its position – as it always does – “we’re just a venue”. If he had bought an expensive computer, it would remain his problem. If he, on the other hand, had “just” purchased some cheap toy he could go through the process of getting compensation through Ebay’s insurance. If any of you have gone through this process, you know that for a new customer, if they were to do it at all, this would mean a huge amount of time and effort. And we still ask ourselves, “Where have all the good customers gone”! What would we do in our friend’s position? An answer isn’t necessary. A much more important question is: how many future customers are now going to be turned away from Ebay through John’s negative word of mouth? And: how long can Ebay hold to its naïve position of “we’re just a venue”? How long will it take before the first class-action lawsuits come in against the company? I don’t know much about the US court system, but in my opinion in Austria, Switzerland (location of eBay's International Headquarters) or Germany it will only be a matter of time until a suit due to negligence leading to corporate fraud is brought before the courts. The problem is that these suits are not going to end at the various satellite-sites but rather at
www.ebay.com and sooner or later the skies over Ebay in America will also begin to darken. And let’s be honest with ourselves: this situation cannot continue forever. The ever-increasing army of victims cannot continue to be ignored (or even ridiculed as they sometimes are) by the Ebay colossus as it continues to get fatter and fatter. I ask myself, what has Ebay actually done in the last few years to put a stop to this systematic fraud? Have the TV ads or PR articles been used to warn against this fraud? Have they, for example on their homepage, placed any large warnings about fraud? Have they during their numerous conferences held any seminars on stopping fraud? Not in the least!! The cigarette industry was also forced to put warnings on their products. But it was of course too late.
The question which we as sellers need to ask ourselves is whether or not this boat can still be turned around. I'm personally uncertain. Only little has been undergone in the last few years to protect the good-willed buyer from disappointments. The efforts of the management until now seem to have been too inefficient and too half-hearted. "’Our best decisions have been the ones where we've seen where the community was going," says PayPal chief Matt Bannick. "Some of our biggest mistakes occurred when we put on our consultant's hats and got in a room and made decisions.’" (fr. same Fortune article as above). I believe the Ebay managers would have been best to have left their hats in the corner forever and rather dealt with the problems of their buyers (among all the others issues previously discussed in this forum). Then they would have noticed that, especially in the auction business, defrauded customers hardly ever return. To the contrary: what they do is spread bad word of mouth and damage the customer base in a very dangerous way. It was only a matter of time before we started seeing slumps in business. That they would appear as brutally as they have to some sellers in the last months, none of us would have been able to predict. But none of us belong to Ebay management.
I believe that the people at Ebay forgot long ago that they are an auction house. Because one of the most important principles in the world of auctions is to NOT treat all sellers “according to the same conditions”. In every auction house around the world it is common for large sellers to receive better conditions than smaller ones. Is that not in fact one of the most essential of the principles of our market-based economy? Whenever I think of these Ebay principles I feel like I’m in a bad movie. It looks to me like every single one of us is just being laughed at. Many of us have formed a financial dependence (thank God I’m not one of them) which is as good as irreversible. I can well imagine the bitterness that some of us experience when it becomes clear that still today, many hundreds of thousands of dollars of Ebay fees later, we’re still being treated like the “private citizen who’s there for the first time”. In my eyes it’s only a matter of time before the first of us begin to organize and start our own platform. Jeff Hess (see Hessfine in “San Jose – Another Problem – Fees increase” 1/6/04, #29 of 62) recently brought this up in this forum, “If ten of us who (pay) average fee's of 200k per year got together, we could have two million dollars to promote a new site.” Since I personally am rather uncertain if on the basis of the above mentioned principles Ebay can, in the long run, maintain its place in the market, I too have been kicking around the idea of investing my Ebay fees in starting up my own site for quite some time. I was, however, rather thinking of an auction site.
In closing, a short anecdote: Some years ago I spent part of my apprenticeship in the Dorotheum in Vienna (founded 1707), one of the largest auction houses on the planet. One of the directors told me shortly before his retirement the following, “You know, our art auctions don’t actually bring in a single penny. And nevertheless, year after year we invest increasing amounts into this sector. But the whole thing is just adornment - just one big show to serve as entertainment for our customers. All of the fabulous opening galas, the press conferences, the million dollar hammer prices and the many single owner sales – it’s all just entertainment. Because our true business is with our mass-produced objects: industry jewellry, accessories, and small gifts. But we should NEVER forget that our buyers only come to us because of our auctions i.e. the entertainment that we offer them. In principle it’s exactly like Las Vegas.”
I look forward to your postings.
Alexander Zacke
Official Ebay University Lecturer, definitely attending the Elite Summit, no matter where & when it will take place
