TECHNOLOGY: Buy selling on eBay, gets lower listing fees
By Sarah Tolkoff
Orange County Business Journal Staff
Aliso Viejo-based online retailer Buy.com Inc. has raised the ire of the eBay faithful.
The company struck a deal to list roughly half a million items for sale at set prices on eBay Inc.’s site, effectively making it a top eBay seller. The items include new consumer electronics, video games, music, books and DVDs.
The deal was never announced.
“It was supposed to be kept quiet,” Buy.com Chief Executive Neel Grover said. “But bloggers were picking up on how many listings we were having on eBay.”
That irked longtime eBay sellers who make their living off the site. They were upset about the competitive threat posed by Buy.com.
They got even more riled up when they heard Buy.com pays lower listing fees—or maybe none at all.
“I’m sure they were aware of the uproar this would cause,” Placentia-based blogger and former eBay seller Randy Smythe wrote on his myblogutopia.com.
Smythe called it “an under the table deal” and a big “disconnect at eBay.”
“The seller community is upset because eBay is giving a great deal to someone offsite who is overwhelming each of the categories with their listings,” Smythe said. “The sellers are forced to increase their listings in more expensive parts of the site just to stay even with their sales.”
The Buy.com deal sparked a debate among Smythe’s blog readers, an audience of about 400 or so eBay sellers, Amazon.com third-party sellers and workers from both companies.
“Things sure don’t look good at all for the independent media seller,” wrote one commentator who goes by “oldschool.” “I have to admit, this piece of news feels more scary to me. It really is the end of an eBay era in a big way.”
An anonymous commentator said: “I was once an economics student, so I understand economies of scale principles. But I just hate to see eBay turning into just another boring shopping portal, full of boring, corporate merchants. EBay was the ‘people’s marketplace.’ The diversity of sellers and merchandise are going to shrink away now, little by little.”
Buy.com is set to sell on eBay a fraction of the millions of products it has on its own site.
For Buy.com, the deal gets it in front of more online shoppers. For eBay, Buy.com could drive more sales as the popularity of its online auctions has waned in recent years.
“We did it because eBay gets the most amount of e-commerce traffic out there and unfortunately we don’t,” Buy.com’s Grover said. “EBay customers may have heard of us but not bought from us. We’ve looked at eBay as our best partnership to date.”
Buy.com is a tiny player among online retailers.
In a press release, the privately held company said it saw profits of about $1 million in the first quarter. Buy.com didn’t disclose sales or other financial details.
In May, New York-based private equity firm Clearlake Capital Group LLC bought a 9% stake in the company, which has some 135 workers here.
Long Time Coming
The deal with eBay was in the works for more than a year, according to Grover.
Executives at Buy.com began talks with former eBay chief executive Meg Whitman. They stalled for a while but picked up when current eBay Chief John Donahoe started in April.
A small test run showed promise over the holiday shopping season last year, Grover said. More items were added and a full-fledged online store was launched in May.
It’s still unclear how much money Buy.com stands to make from the partnership.
“I think it will have an effect on revenues, since eBay gets more than 10 times our traffic now,” Grover said. “I do think that it will dramatically increase our sales over time.”
The deal could have implications for eBay.
The New York Times said in a report that the deal spelled the “noisy and ignominious end” of the “golden era of the small seller on eBay.”
EBay’s founders touted the idea of having a level playing field for buyers and sellers online.
Purists argue that the Buy.com deal messes with eBay’s fundamental values and gives big guys an unfair advantage.
“The bigger sellers wanted the same opportunity as Buy.com—the more volume you put up, the cheaper the listing fee,” blogger Smythe said. “EBay has always said ‘no’ to negotiations. They went outside instead of looking at the sellers that were doing really well. They didn’t even bother to ask them.”
After the uproar, eBay created a new category, dubbed “diamond” seller, to give breaks to those who deal in large volumes.
But the requirements are too stiff to include many sellers, according to Smythe.
“EBay says, ‘If you can measure up, we can negotiate with you on fees and some other things,’” he said. “But you have to do a minimum of $500,000 a month in sales.”
Others critics say they don’t want to see eBay cater to the mass market.
“Buyers on eBay want the hard-to-find stuff—that’s why they go to eBay,” Smythe said. “But eBay wants to get all the new products, thinking that their buyers will have a better experience that way.”
A few years ago eBay started selling set-priced items through a feature called “buy it now,” which allows a buyer to opt out of participating in an auction and just buy an item.
In response, big sellers have been opening their own online stores through their own Web sites. Some have migrated to selling on Amazon.com.
“The sellers are doing what they can,” Smythe said. “No one is committing all of their eggs to any single site.”
Buy.com’s Grover defends the deal despite the uproar.
“Truthfully, there are some sellers who are going to care. They are most likely paying a higher (listing) fee than Buy.com is,” he said.
He didn’t give the financial specifics of Buy.com’s deal with eBay. He did say Buy.com was able to wrangle lower listing fees because it has something that individual sellers don’t—high volume.
Buy.com has more to offer than the average eBay seller, Grover said, including a big customer support network, low prices and free shipping on a lot of items.
“The customer might be more likely to come back to eBay and buy an auction item after dealing with our store,” he said. “That will help all of eBay’s sellers, including the little ones.”
posted on August 2, 2008 06:06:05 PM newIf you can measure up, we can negotiate with you on fees and some other things
Here are some of the "other things." Fact, not rumor.
1) Buy is allowed to reject payments by eCheck. You try that with eBay and see how far you get.
2) Buy *requires* you to pay within six hours of the end of auction. Wouldn't that be great for the rest of us?
3) Buy *requires* you to have a Confirmed address. If you do not, they reject the transaction and then *pester* you to agree to a Mutual Agreement not to Complete Transaction -- so Buy gets their FVF fees back!
4) Even if you don't complete the transaction and don't opt-in, Buy puts you on their mailing list. Yes, they spam you.
Such great eBay citizens. eBay must be so proud.
fLufF
--
It looked like she had that dreaded neurological disorder that lets you browse and bid on eBay all day long but won't let you push the "Pay" button.
