Basic Supply and Demand

[my-cottage-books-and-antiques]

I've noticed a couple of, let's just call them trends, on ecommerce sites. 

Now, I'm not an economist, but I've always understood the basic point of The Law of Supply and Demand.

I would expect CEOs of ecommerce sites to understand this as well.

So, the two trends:

1. Let's shift fees to buyers, and remove or reduce them for sellers. This will incentivize sellers to list more! Yay!

Except, it might very well drive some buyers away. 

So, the goal seems to be: "We've increased supply and reduced demand. This will improve our business!"

2. And then there's this trend: "AI is pure magic! We can use it to speed up the listing process, so that our sellers can list more and more faster and faster. And this enormous selection will---maybe---bring us more buyers. 

Or not. Because we might be increasing the number of items by a factor of, say, 100x, but we might only increase the number of buyers by a much lower amount.

So, "we've increased supply exponentially and maintained demand, or maybe sparked a tiny increase in demand. This will improve our business!"

Anyone else think these strategies could maybe use a little review by the powers that be?

[luckythewinner]

1) Shifting fees to buyers was a desperation move by Mercari who were failing in the US market. It has not worked. Aside from Mercari, what other e-commerce sites are doing this? 

2) Good grief. The availability of AI in the listing process has not increased the supply on eBay "exponentially". I dispute your premise. 

[wastingtime101]

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@luckythewinner wrote:

1) Shifting fees to buyers was a desperation move by Mercari who were failing in the US market. It has not worked. Aside from Mercari, what other e-commerce sites are doing this? 

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Poshmark tried it and within 3 weeks reversed course as it killed sales on the venue.

[tobaccocardyahoo]

I know of no data which tells us the sell through rate on Ebay or any other internet marketplace.

I suspect it has decreased, but cannot prove it has.

Assume it has decreased. The Ebay GMV is decreasing. Competition for many items is higher. The cost of hosting, supporting, developing and servicing Ebay has increased along with everything else in the country.

AI primarily is intended to lower costs. Whether it does or not is questionable. It is secondarily attempting to approve sell through by making listings more useful - that simply has not worked with the current software implementations. Given the number of illiterate sellers who join the site, this may be a desperate need, and maybe I am wrong in saying it has worked. There are a lot of listings written by people who cannot communicate in English. Those sellers are here in the US as well as in other countries.

The Mercari and Poshmark moves were outliers.

Where we can see buyers sharing the cost of internet exposure are on the online auction sites like Live Auctioneers and Invaluable. Buyers premiums are now high enough that they are depressing the sale prices of many items.

I can buy on those sites and resell on Ebay.

[dbfolks166mt]

     With regard to your economic premise to complete the analysis you would need to factor in the impact on the supply and demand curves, their shifts and the impact on the equilibrium selling price. Shifting the fees to the buyers would do little to incentivize me to list more. I already factor the FVF's into the cost of my item when I list it so in essence the buyer is already paying it anyway. Shifting the fees to the buyer would however allow me to adjust my cost model and lower the listing price but the net end effect is the buyer would still be paying about the same price. 

     With regards to AI. The AI is only viable if the quality of the results are high, consistent and you have trust/faith in the outcome. At the present time the AI in use by eBay is far from being on the upper end of the quality scale. If you would be spending more time checking the results of the AI application it's use may be of little benefit. As an example the autocorrect function on my phone when I am texting often produces some unintended results a lot of which I don't catch before sending the text. 

[chapeau-noir]

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@luckythewinner wrote:

1) Shifting fees to buyers was a desperation move by Mercari who were failing in the US market. It has not worked. Aside from Mercari, what other e-commerce sites are doing this? 

2) Good grief. The availability of AI in the listing process has not increased the supply on eBay "exponentially". I dispute your premise. 

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Poshmark, Delcampe, Depop. Poshmark has reversed this. As a trend it's fail IMHO.

[reallynicestamps]

I guess it sounds snarky, but:

There are a lot of listings written by people who cannot communicate in English. Those sellers are here in the US as well as in other countries.

At least those whose mother tongue is not English often make use of Google Translate or Babelfish to turn good "foreign" into passable English.

[dbfolks166mt]

I know of no data which tells us the sell through rate on Ebay or any other internet marketplace.

I suspect it has decreased, but cannot prove it has.

Assume it has decreased. The Ebay GMV is decreasing. Competition for many items is higher. The cost of hosting, supporting, developing and servicing Ebay has increased along with everything else in the country.

AI primarily is intended to lower costs. Whether it does or not is questionable. It is secondarily attempting to approve sell through by making listings more useful - that simply has not worked with the current software implementations. Given the number of illiterate sellers who join the site, this may be a desperate need, and maybe I am wrong in saying it has worked. There are a lot of listings written by people who cannot communicate in English. Those sellers are here in the US as well as in other countries.

The Mercari and Poshmark moves were outliers.

Where we can see buyers sharing the cost of internet exposure are on the online auction sites like Live Auctioneers and Invaluable. Buyers premiums are now high enough that they are depressing the sale prices of many items. 

I can buy on those sites and resell on Ebay.

     Quit giving away sourcing information. I too use the online auction sites for sourcing items but most people think the auction format is dead everywhere. I would prefer they continue to think that. 😁

[richard1rst]

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@my-cottage-books-and-antiques wrote:

I've noticed a couple of, let's just call them trends, on ecommerce sites. 

Now, I'm not an economist, but I've always understood the basic point of The Law of Supply and Demand.

I would expect CEOs of ecommerce sites to understand this as well.

So, the two trends:

1. Let's shift fees to buyers, and remove or reduce them for sellers. This will incentivize sellers to list more! Yay!

Except, it might very well drive some buyers away. 

So, the goal seems to be: "We've increased supply and reduced demand. This will improve our business!"

2. And then there's this trend: "AI is pure magic! We can use it to speed up the listing process, so that our sellers can list more and more faster and faster. And this enormous selection will---maybe---bring us more buyers. 

Or not. Because we might be increasing the number of items by a factor of, say, 100x, but we might only increase the number of buyers by a much lower amount.

So, "we've increased supply exponentially and maintained demand, or maybe sparked a tiny increase in demand. This will improve our business!"

Anyone else think these strategies could maybe use a little review by the powers that be?

---

Ah, yes - "Laws".

I have made it quite clear in previous postings that I am an absolute  devotee of Adam Smith's Invisible Hand. And yet I freely admit that for all its simplicity it occasionally fails to deliver. To paraphrase Frank Zappa "We are a nation of laws - badly written and randomly enforced badly premised and frequently skewed - by Murphy's Law.

Parenthetically, I have a shelf just outside my front door for deliveries. It is supported by a House of Cards which I see as a perfect metaphor for life in general.

[dhbookds]

I think the sites that are/were trying to add fees to the buyer thought sellers would lower prices, because of no fees,  which would attract buyers.......  That probably failed on the first level...many sellers didn't lower prices.  And on the second level, buyers failed to accept the added fees when they got to checkout.  Many probably labeled it a bait and switch. 

I also think they thought encouraging more sellers with no fees would increase sales since the sellers themselves would actually buy more on the site.....a fact that has often been pointed out to Ebay even as they lose sellers on the theory that there will always be more sellers willing to try selling.

To me, supply is everywhere........it's the demand that has to be encouraged on the site.....and money is usually considered as the best attraction.....  encouraging brand (ebay) loyalty....  And there are many ways it could be done.......  Encouraging sellers to run sales (with a cut % of fees).....perhaps make certain days specific to specific categories and advertise the sales, in doll magazines for dolls sale day..... Loyalty rewards to buyers....green stamps or "earn a % off after spending X within 6 months or  a year"........or even free ebay "junk".......pens/pins, etc.  people do love "free stuff"....Become an ebay "favored buyer"........get YOUR pin if you spend x amount in a year.  Hokey, probably, but people do respond to that kind of thing......

Ebay needs a GOOD marketing manger that concentrates, not only on the "big" spenders, but on the little guy buyers........there are millions of them out there.......Ebay needs to get them here. 

[m60driver]

Placing a cost on buyers is what makes the likes of Amazon (Prime) and Costco (annual fee) profitable.  So other online platforms dabbling in this area is not unexpected.  Both Costco and Amazon make nearly 100% of their annual profit on retail sales from membership fees.  They only need to break even on the retail sales and they have the data to do this successfully.  That is why it is so hard to compete with these companies.