(FORTUNE Small Business) -- In the online auction space, "eBay" is a verb. Since launching in 1995, eBay (EBAY, Fortune 500) has been the online marketplace for people seeking to unload or pick up anything and everything.
But a week after eBay announced massive changes to its fee structure and its vaunted feedback policy, competitors say the behemoth seems suddenly vulnerable. Outraged sellers have begun seeking new outlets to hawk their products, and alternative marketplaces are seeing significant jumps in new-user registrations.
OnlineAuction.com, based in Grants Pass, Ore., reports that roughly 7,500 new sellers have opened accounts since eBay announced its new policies last week. That's a 15% jump in the site's user base, within a matter of days.
"eBay has dropped the ball, and there's a huge window of opportunity," said OnlineAuction CEO Chris Fain.
Another contender, eCrater, has registered 1,400 new sellers within the last few days. That's more than double the site's average weekly total.
"They call and introduce themselves as eBay refugees," said eCrater founder Dimitar Slavov.
Creators of eBay alternatives say their time has come.
"People are seeing the light, and it's very exciting," said OnlineAuction's Fain, who is a former eBay "PowerSeller," eBay's designation for its highest-volume sellers.
EBay fee hike sparks seller rebellion
Fain's sales of vintage watches and specialty cars reached $1 million a year on eBay, but he became disenfranchised with the company's steady rate increases.
"I was paying eBay $7,000 to $8,000 a month in fees," said Fain, who launched OnlineAuction in 1998 but continued selling on eBay until 2005. "They were taking too big a piece of my bottom line."
While eBay charges sellers a percentage of an item's final sale price, OnlineAuction refrains from taking a cut. Instead, it allows vendors to list as many items as they want for a flat membership fee levied on a monthly or yearly basis.
"We're the Costco (COST, Fortune 500) of online auctions," Fain said.
Should OnlineAuction reach the 250 million-strong user base that eBay currently holds, the company could be "six times more profitable without being as greedy," Fain claims.
He estimates that 85% of OnlineAuction's sellers are eBay defectors. The site now has 50,000 sellers, with more than 11 million items currently listed.
That's still a mere fraction of eBay's 113 million items, Fain admits.
"Because eBay is such a huge entity, it's hard to compete unless you get the people behind you," Fain said. "But that's what's happening right now."
Sellers seek alternatives
Part-time vendor David Cox is one of those people. Last week, he concluded a 10-year run selling computer accessories on eBay and opened an $8-a-month account with OnlineAuction. Cox, of Marble Falls, Ark., said his new home reminds him of eBay's early days.
"I feel they will be more responsible to me as the seller," Cox said. "It certainly won't have the market that eBay does now, but I'm positive in time buyers will migrate to other sites."
Cox plans to also check out eCrater, which allows sellers to use its marketplace free of charge. ECrater founder Slavov said vendors will never be asked to pay anything.
"There are too many fees on eBay and Amazon," said Slavov, a software developer who launched eCrater in 2004. eCrater, based in Irvine, Calif., turns a profit by charging vendors for premium positions, selling Internet advertising and partnering with Google Checkout.
ECrater now has 33,000 active sellers and lists nearly 1 million items, according to Slavov.
Another upstart attracting attention from fleeing eBayers, San Francisco's iOffer, is built around a focus on friendly engagement between buyers and sellers. In lieu of using an auction format, iOffer has sellers state a starting price or ask buyers to make an offer. Both parties negotiate until they're satisfied.
"Overall, I'd say sellers like being more interactive," said iOffer CEO Ryan Boyce. "There's more flexibility, and you can sell a lot more when you engage with the buyer."
Listing items on iOffer is free. Final value fees are levied on a sliding scale but are significantly lower than eBay's, Boyce said.
Also a plus for former eBayers: Sellers can transfer their eBay feedback scores to iOffer.
"They're not starting from zero," Boyce said. Another iOffer feature allows users to trade items.
"With the recession, people don't have as much free cash lying around, so swapping has become more popular," he said.
iOffer has accumulated 75,000 sellers and nearly 1 million total users since its 2002 launch.
Another auction site, Chicago-based uBid, targets bulk sellers liquidating excess inventory. Its 7,000 participants include Sony (SNE), Motorola (MOT, Fortune 500) and Dell (DELL, Fortune 500). All sellers submit to a 10-point financial exam to ensure they're qualified to do business on the site: "That's part of our stringent anti-fraud stance," said uBid CEO Jeff Hoffman.
However, uBid is not a viable alternative for eBay vendors who aim to sell products at or close to retail price. Most uBid auctions start at $1 and carry no reserve price.
"If your eBay store is the way you feed your family, you sell for profit," Hoffman said. "Ubid is for asset recovery on products that aren't selling at retail."
On the other hand, the auction site Bidville, which uBid purchased in 2006, does focus on what Hoffman calls "consumer-to-consumer" sales - the market eBay now dominates. Listing an item is free, and final value fees start at 5% for items under $25. For items that sell for $1,000 or more, sellers pay a flat $25 fee plus 1% of the amount over $1,000.
More than 350,000 sellers are registered on Bidville, but 25,000 active accounts provide most of the site's 1 million listings, Hoffman said.
Overstock - the site best known for liquidating retailers' excess inventory at low, fixed prices - also sees opportunity in eBay's new policies.
Following eBay's announcement last week, the Overstock (OSTK) team worked through the weekend to design a new strategy highlighting its lesser-known auctions space, said Overstock CEO Patrick Byrne.
The result? Overstock, in Salt Lake City, will redesign the header on its homepage to direct more traffic to its auctions tab. It plans to accelerate a software rollout that will beef up its auctions community message boards - and it's laying plans to produce 15-second Internet commercials to get the word out.
"We think the time is right to position ourselves in this category," Byrne said.
Even Amazon has noticed an uptick in new seller accounts in the last week. Best known in its early days as an online bookstore, Amazon (AMZN, Fortune 500) expanded into consumer electronics and other categories, and in 2000 began allowing third-party sellers to list their wares alongside Amazon's offerings. All products are offered at a fixed price.
Today, 26% of all items sold on Amazon come from its 3 million third-party sellers, who range from mom-and-pop vendors to Target Corp (TGT, Fortune 500).
Amazon refrains from offering auctions because its buyers and sellers prefer the convenience of a set price, according to business solutions general manager Matt Williams. Amazon has devised a number of different rate programs for sellers; one takes a percentage of gross revenues, while another charges a referral fee per item.
"We've certainly heard of frustration with other marketplaces, and we've seen a significant increase in registrations," said Williams.
Longtime eBay seller Debi Lee said Amazon has worked well for certain items in her repertoire. She tired of eBay's tactics and now uses the site primarily to educate consumers about her products, which include silk clothing for plus-sized women. Lee has also launched her own Web store and advertises through Google's AdWords, where she pays only when consumers click on her ad.
The Google question
A number of sellers are clamoring for Google (GOOG, Fortune 500) to launch an auction site, and Lee said she might conside that option if it were available. Lee also plans to investigate Buy.com and Etsy, which focuses on handmade crafts.
"Why sell only through one venue?" said Lee, of Oakland, Calif. "Those 100%-reliant on eBay for their livelihood will now understand that folly."
Google is being customarily tight-lipped about any plans to examine the auction space. "We don't comment on market rumor or speculation," said a company spokeswoman.
How Google can make - or break - your company
Yahoo retired its U.S. and Canadian auction sites in June 2007, but it still operates Yahoo Auctions in select Asian markets. Company spokeswoman Diana Wong declined to speculate on whether Yahoo (YHOO, Fortune 500) might get back into the U.S. auctions business.
Representatives of Microsoft (MSFT, Fortune 500), which last week launched a $44 billion bid to buy Yahoo, also declined to comment.
Meanwhile, eBay's corporate response to the seller backlash is to downplay it.
While sellers are burning up Internet forums, including FSB's discussion board, with vitriolic criticism of the planned new policies, eBay spokesman Usher Lieberman said sellers' reactions in eBay's town hall forums have been "balanced."
"The community understands the rationale behind these changes," he said.
At the same time, Lieberman acknowledged that eBay's sellers are, first and foremost, entrepreneurs.
"They have a lot of different channels available to them, and we expect they're evaluating what the changes mean for their business," he said.
posted on February 6, 2008 07:47:24 AM new
It's interesting to me that there's no mention in that article about our outrage over the changes in feedback. For me, and perhaps many others, that was the last straw. (Although I haven't shifted to another venue - yet.)
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posted on February 6, 2008 08:23:19 AM new
I looked at Online Auction site recently,I dont see any bid?
Ebay sellers may want to move to other sites,but the problem is the bidders prefer to stay on Ebay,they dont seem to miss the sellers who left.
I listed a few items on Bidville,no bid for months but when I list them on Ebay,they are sold in 7 days.
I bought a few items on Ioffer,Bidville and Epier,overrall experience is okay,no cigar.
The problem I ran into is that they ask for money order and then tell you the item is missing or sold,so would you like a substitute?
Well,what would you do if they have your money already and they are not going to refund it?
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Lets all stop whining !
posted on February 6, 2008 08:30:31 AM new
Thanks for the post Cash.
I think this has alot of information that we can use or at least I can. This will give me some alternatives to look into during the boycott.
posted on February 6, 2008 08:54:25 AM new"Why sell only through one venue?" said Lee, of Oakland, Calif. "Those 100%-reliant on eBay for their livelihood will now understand that folly."
When there's only one venue that's profitable for what you sell, it's hardly folly to sell there.
When it stops being profitable, you go elsewhere or do something else. Business 101, ever and always. Only thing's changed is that people whine about it now, endlessly.
Lotsa luck elsewhere, hon. Don't let the screen door smack you in your ample fundament on the way out.
posted on February 6, 2008 09:15:32 AM new
eBay is trying to focus on the customer experience. If they can make that work, sellers will not abandon a known marketplace for letsrentserverspaceandhaveanauction.com any time soon.
Whether or not eBay will succeed in providing a richer customer experience only time will tell, but it is much easier for eBay to get sellers to conform to buyers than the other way around.
As has been pointed out here in the past, the only reason eBay competitors offer lower (or no) fees is because they have to in order to get any sellers. If they could charge more, they would.
posted on February 6, 2008 09:53:33 AM new
BUT getting sellers is not good enough,they have to get the bidders too! Otherwise it just becomes a giant parking lot.
I have seen this before-every time Ebay raises fees whether it is reserve fee,listing fee etc,seller said they are going to leave and then they come back.
Will this time be different?
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Lets all stop whining !
posted on February 6, 2008 12:34:40 PM new
Perhaps what Onlineauction.com should do is have a registration fee of $1.00 and use that money directly to support a massive advertising campaign drive to buyers. Ebay's commercials suck, and it wouldn't be difficult to come up with a catchy ad campaign to pull bidders.
The problem isn't always as simple as Ebay did this, ebay did that... Alot of this headache that we experience is because of the few bad apples who steal bidders money and/or send people crap. Simply put, ebay has 13 years experience in working with this problem and many of their solutions work in the favor of bidders and stockholders because of those few bad apples.
And, let's not forget... these companies offer free services until you get hooked in and then start charging, tweaking their fee structures, etc. Never expect those tweaks to be in the sellers favor. Case in point... ebay, paypal, and vendio. Constantly looking to squeeze another few dollars out of sellers. Every time one quits, there are more to pick up the pieces and give it a shot.
What do you cough up to these companies combined to sell on ebay? 10%, 15%, 25% in overhead? If you owned a retail store with rent, utilities, labor costs, etc. your overhead climbs way higher than that. This is how these companies justify raising rates. A typical retail business should feel lucky to net 25% profit after all of the overhead. I know, because this is a bone of contention our business has. We struggle to keep the doors open and have $7000 a month in overhead, excluding merchandise. If I sold exclusively on ebay , craigslist, and our website our overhead would be cut to maybe $2000, leaving $5000 a month directly into our pockets. $2500 extra a month to never have to sit in a store waiting for your next customer seems pretty tempting... I can't wait for our lease to end. lol.
posted on February 7, 2008 07:36:25 PM newWhen there's only one venue that's profitable for what you sell, it's hardly folly to sell there.
Fluffy is a bit off base here, although the statement, if it were true would be valid.
Only problem is there are many sites out there that can be profitable. You just have to be smart about it. I read in this thread where someone lists their items at many sites and when it sells, it is cancelled from the other sites. This is an extremely good business plan. It can be a little more labor intensive, depending upon the sites you list at. Personally I like sites where the item stays listed until you cancel or it sells. Those are the least labor intensive sites as you only need to go to them when you list, have a sale or cancel. No going to the sites to relist. Ebay should not and cannot be eliminated from most sellers business plan. They are a monopoly, but mixing in other sites should also be in the plan.
posted on February 7, 2008 08:20:00 PM new
There's another option for sellers, one that I'm going to make. GET A JOB. I, and many other sellers on eBay. took a huge financial hit when we decided to sell full-time on eBay. We did it anyway for the fun and the freedom. Well, it isn't much fun anymore and having a venue that can pull the rug out from under your feet at anytime doesn't give much freedom. I'll probably keep my store open. May even run a few auctions. EBay is just too shaky to support a family, albeit, a small one.
[ edited by pixiamom on Feb 7, 2008 08:26 PM ]
