With the growth of Buy It Now sales, eBay provides a unique route to market for established retailers. So how does it work and how big is the threat to bricks and mortar?
What is eBay?
The birth of eBay in 1995 shook up the established route to market for retailers, translating one of the oldest retail formats in the book – the market trader – onto the internet.
However, it has evolved from its roots as an auction site to provide established retailers with a unique route to customers.
EBay acts as an intermediary between retailer and buyer and is policed by the online community who rate their shopping experience. It has no warehouse, stock, stores or salespeople. Retailers take payment and ship the goods directly to the customer. EBay makes billions of dollars in fees charged to sellers that set up shop on the site.
How does eBay work with retailers?
In the UK alone, eBay has 123,000 online retail shops, generating sales of €1.9bn (£1.6bn) a year. Its relationship with retailers has altered considerably. Today, at least 50 per cent of items sold on eBay are new, branded goods, purchased using the Buy It Now function rather than being auctioned.
Why do retailers use the site?
Retailers can get far greater visibility on eBay and buyers have access to a far wider range of goods than those available in a bricks-and-mortar store. The ability for buyers and sellers to rate their experience also allows a retailer to build up its reputation.
How has eBay evolved its model to encourage large retailers to use the site?
EBay has altered its site to enable retailers to list big volumes and it is now multi-SKU. Fees paid to eBay by the retailer are determined by the type and volume of product sold and customer feedback. If a retailer is a big-volume seller with consistently good feedback, it is given discounts on its fees.
It can’t all be rosy, can it?
EBay has been at the centre of the furore over the sale of counterfeited and stolen goods online. It has set up a Verified Rights Owner (VeRO) programme with more than 30,000 brands, where it will remove products from the site no questions asked – mostly within four hours of a complaint being lodged.
EBay is also lobbying for a change to EU competition laws after conducting a survey that found that almost half of online sellers were being “bullied” by manufacturers and suppliers to prevent the sale of online goods or dictate the prices at which they could be sold.
EBay says that it has not got a problem with selective distribution as such, but it regards the practice as “a new form of digital protectionism”.