Is eBay’s Emphasis on Fixed-Priced Sales Doing More Harm than Good?

By Matt Pace, Director of Retail & Consumer Products, Compete
After trying in vain to cast itself as an online “retailer” to rival the likes of, eBay recently announced it was again shifting its focus, this time to the secondary markets for used goods and overstocks. What precipitated the change?

In order to compete in the fixed-price marketplace, eBay has enacted a series of policies and site changes that have favored power sellers over smaller sellers. As casual sellers have abandoned the site, eBay’s traditional customer base has migrated elsewhere in search of the hard-to-find products upon which eBay built its business. Traffic to Craigslist, for example, has risen 40% over the past year to 45 million unique visitors in February. In contrast, eBay’s traffic was down 5% to 72 million visitors last month over the previous year, while Amazon’s traffic surged 19%.

Not only are fewer shoppers returning eBay, but average order values have stagnated. Since eBay’s marketplace revenues are driven by fees charged to sellers, declining traffic and flat transaction values have led eBay to raise its fees in hopes of meeting Wall Street’s expectations.

The more eBay has tried to be a retailer, the more its users are shopping at sites offering better overall shopping experiences. The percentage of eBay’s visitors who shopped at Amazon jumped from 41% in February 2008 to 53% last month. Over the same period, Amazon visitors’ cross-shopping of eBay has remained unchanged at 58%, suggesting eBay’s fixed-price strategy has failed to attract significant numbers of new shoppers to the site.

With its fixed-price emphasis, eBay has seen a steady increase in the number of shoppers making “Buy-It-Now” purchases over the past year. In February, 11% of eBay’s visitors, or 7.8 million customers, made a Buy-it-Now purchase (up 20% from the previous year). However gains in fixed-priced activity have been eclipsed by declines in eBay’s traditional auction business. The percentage of eBay’s traffic that made a bid on an auction-style listing dropped from 13.5% in February 2008 to 12.2% last month. In total, 1.5 million fewer shoppers placed a bid on eBay last month than did last February.

By focusing on fixed-priced items sold by large sellers, eBay has blurred the distinction between it and the litany of shopping comparison sites and tools on the web. In so doing, eBay has traded away much of the brand equity that once set it apart from the rest of the online retailing universe.

While consumers are ever in search of a bargain, they increasingly expect a level of service seemingly beyond eBay’s ability, or willingness, to deliver. It remains to be seen whether eBay’s new focus will help it acquire new customers, let alone win back users who have long since given up on the site. What is clear, however, is that eBay now finds itself in a fight to remain relevant at a time when rivals in both the classified and retail space show no signs of pulling on the reins.

Matt Pace heads the Retail and Consumer Products practice at Compete, Inc., a TNS Media company and leading provider of web analytics and digital intelligence. For the past five years, Matt has helped companies develop and optimize their online marketing strategies. Matt is a frequent speaker at retail events and is often quoted in industry publications. Prior to joining Compete, he worked in Deloitte's high-tech practice. Matt holds an MBA from the University of Maryland and a BS from Brigham Young University, and can be contacted at