Tue, Feb 08, 2011 - Page 10 News List

EBay bids on a new path to maintain its relevance

NY Times News Service, SAN FRANCISCO

EBay Inc was growing so fast early in its history that Meg Whitman, its former chief executive, liked to joke that “a monkey could drive this train.”

John Donahoe, her successor, still has the company on the track, but eBay’s competitors are moving a whole lot faster.

Three years into the job, Donahoe has made only modest progress in improving growth at the online retailer. He has given the Web site a cosmetic makeover and recast it as an outlet mall where retailers can unload last season’s merchandise, instead of being an all-encompassing auction house.

“I think we’re turning a corner,” Donahoe said in an interview last week.

However, while eBay’s marketplace revenue grew 8 percent to US$5.7 billion last year, eBay is still losing market share to its rivals, as global e-commerce sales increased 18.9 percent last year. Amazon.com Inc widened its lead last year, while Groupon, the daily deal service, and a number of specialty retailing sites like Etsy began nipping at eBay’s heels.

Donahoe said he plans to tell Wall Street securities analysts on Thursday at the company’s analyst day that eBay can now “go on the offensive” by building on its early momentum with mobile shoppers and that it will better integrate sister products like PayPal Inc, the online payment service.

However, he is not expected to announce any major new products or services.

Analysts and eBay’s investors have continued to pressure him to deliver on an earlier promise to match the growth of overall global e-commerce this year. However, being able to achieve that goal — JPMorgan forecasts e-commerce will grow 18.9 percent again this year — is hardly guaranteed.

“While they’ve made some nice initial progress, there are quite a number of problems left to address,” said Scott Kessler, an analyst with Standard & Poor’s.

EBay’s troubles were a long time coming. The company managed to annoy many of the people who sold goods on eBay and those who bought them. Buyers complained of clutter, irrelevant search results and fraud. Sellers grumbled about what they saw as excessive fees and eBay’s favoritism of big retailers over small merchants.

Growth in sales volume, the value of merchandise that changed hands on the site, excluding automobiles, started to flatten in 2006. After the recession began, the volume declined — even though eBay used to brag that it thrived in tough times because users emptied their closets and attics for extra cash.

After countless tweaks, eBay’s marketplace Webs ite now has a noticeably cleaner design to keep buyers focused on the merchandise. Donahoe also invested in improving eBay’s search engine so users can better sort through its more than 200 million products.

Giving various product categories a custom look, rather than a generic design, is another way eBay is trying to compete. EBay thinks users shop differently depending on the kind of product they are looking for, and catering to that translates into more sales.

In the fashion area, users can browse images rather than text. A shopper who finds a black purse she likes, for example, can click on “see more like this” to reveal others in similar style and color. More custom looks are planned for later this year in the auto parts and home and garden categories.

Despite all the effort going into sprucing up eBay’s marketplace, half a dozen buyers and sellers interviewed recently did not notice any cosmetic changes. However, they cited a few other upgrades that they said made buying and selling easier.

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