eBay Bucks the Trend for Online Success

Auctioneer becomes place for businesses to sell goods, attract customers.

Since opening its virtual doors in 1995, eBay Inc. has become one of the success stories in e-commerce. The San Jose, Calif., company has more than 37 million registered users and said it expects to generate more than $9 billion in gross merchandise sales this year. Where once the site was the domain of individuals buying and selling hard-to-find items and collectibles, now businesses large and small are using it as a channel to sell goods and attract new customers. In fact, the company said more than $1.4 billion in computer and electronics items will be sold on eBay this year. CEO and President Meg Whitman spoke with eWeek Department Editor Jeffrey Burt after her keynote address at Comdex in Las Vegas this month.

eWeek: Can you talk about the evolution of eBay from a place where individuals traded collectibles to one used by many companies as a sales channel?

Whitman: eBay has evolved dramatically since its inception on Labor Day 1995 and really even since 1998. In 1998, it was one site, eBay.com—our users were mostly trading collectibles, and we had no services to help people do business on eBay. What happened over time was that buyers and sellers began to lead us into categories, whether that was computers or consumer electronics or used cars or jewelry, and we followed the users.

Today, more than half of the gross merchandise sales—thats the value of the goods sold on eBay—are from what we call practical categories: home and garden, sporting goods, consumer electronics, computers, and the minority now is the collectibles business. There also is the global nature of eBay. It was just eBay.com operating here in the United States, and we now have 17 sites around the world that encourage trade in local currency and local language and categories of local interest.

eWeek: Much of your keynote speech focused on the growing use of eBay by the IT industry. Can you elaborate?

Whitman: Computers and consumer electronics are among our fastest-growing categories on eBay, and that includes networking equipment, routers, IT equipment of all kinds. I think its because the buyers and sellers find it to be a very efficient distribution channel for these kinds of products, and many of our top sellers tell us they are attracting customers to their businesses that they never would have met in their normal course of business. So its very efficient: They get better value for overstocked, liquidated, end-of-life products; and the tech business is so fast moving that the life cycles are shorter here than in most other businesses.

eWeek: eBay over the past year has aggressively pushed its fixed-price sales initiative. How has this worked out for the company?

Whitman: Fixed price is working on eBay. This past quarter, our users did $295 million in gross merchandise sales in the fixed-price format, up from zero a year ago. And we have plans to really integrate Half.com [Inc., a fixed-price, person-to-person marketplace bought by eBay in July last year] more aggressively on the eBay site, and it will be called eBay Express Buy.

Buy It Now, the feature that allows a seller to either start the auction or have a consumer take it at a particular price, has gotten tremendous adoption not only on eBay.com but also on eBay.DE and eBay.UK. And then eBay Stores was launched in a pilot phase in June, and we now have 31,000 storefronts on eBay. So I think its a big growth leg of the company because it attracts a slightly different demographic. People love auctions, and there are other people who want the immediacy and convenience of fixed pricing.

eWeek: What percentage of revenues come from fixed pricing?

Whitman: Less revenues than gross merchandise sales. About 16 percent of gross merchandise sales come from fixed price, and its probably 14 to 15 percent of our revenue.

eWeek: Fixed pricing brings you into even closer competition with Amazon.com [Inc.]. Can you talk about that competition?

Whitman: I think at some level we compete with Amazon because we are competing for buyers and sellers who want to sell online. That said, our sweet spot tends to be new, unique, hard-to-find items that are rare in some way. At the other end of the spectrum [are] real value-oriented items—end-of-life, surplus, overstocked, returned. And Amazons sweet spot is really in brand-new, manufacturer- suggested-retail-priced kinds of goods. So, while we are both in the online space, I think the kinds of goods that both companies are known for is actually pretty different.

eWeek: What is eBay doing to retain the customers it has?

Whitman: The first thing we want to do is make sure that if you register on eBay, we make it easy for you to buy or sell. We work very hard on user interface, the ability to navigate, the ability to figure out what to do quickly.

Secondly, we also have worked quite hard to make our users aware of the breadth of categories. If you are a collectibles buyer or seller on eBay, you might not even know today how big our computer category is or how big our home and garden category is. We are doing cross-merchandising and beginning to experiment with e-mail where, if youve been a collectibles buyer, we say, "Hey, do you know there are these used cars on eBay?"