Trade Me trounces eBay, and eBay is in real trouble

The evidence mounts against eBay, as they continue to cast away their franchise. It’s really sad to see this happen as they naturally own their space and should be unassailable if they were playing it right.

They are not.

Over the years the site has increased in complexity and decreased in humanity, until the community feels obliterated and the only sellers are the larger professional ones.

In New Zealand Trade Me’s strategy is to keep things simple and focus on the person to person transactions. That is working.

Auction and classified sites make money by attracting visitors, turning those visitors into members, turning thse members into sellers that list items, selling those items and collecting a percentage of the value of thise items listed and sold. eBay is losing visitors and is lagging in items for sale.

Let’s look at two data points to back up the decline of eBay.

1: Pageviews: This disturbing chart came via Auctionbytes, and shows a 30% drop in US page impressions from last October to this October. That’s a massive sign of an unhealthy marketplace.

2: Listings Today eBay Australia has 1,113,647 listings located in Australia, eBay.com has 25.2m listings located in the USA while Trade Me has 1,255,082 listings in NZ. (That’s right, there are more actual listings on Trade Me than on eBay Australia.)

That’s 55 listings per 1000 Australians, 84 per 1000 US citizens and 305 listings per 1000 New Zealanders. That’s astonishing – 5.6 times difference between Nz and Australia, and 3.6 times between NZ and USA.

Now we do need to adjust for the critical difference – eBay charges listing fees while Trade Me does not. We used to say (and observe) that free listings sites attract 2 time the listings of non-free ones. That would still leave Trade Me at 152 listings per person – 2.8 times more than eBay Australia and 1.7 times more than eBay.com USA.

Go Trade Me. What’s going on?

To me the differences are the business versus personal focus, the advertising mentality and usability.

Business versus Personal

eBay’s listings skew strongly to the biggest sellers, who essentially run giant shops on eBay’s site. Over the years eBay has increasingly pandered to these sellers and the result is a giant shopping mall rather than a person to person market.

That has meant they are vulnerable to increasingly competent competition from Amazon & Yahoo stores, and from sellers’ own online stores. Traffic to those stores is increasingly via Google, and so the need for a single marketplace is slowly fading away.

The focus on businesses has also left eBay vulnerable to the economic downturn. This is a travesty as the auction model should weather storms better than almost any other retail. (e.g. beer and flour will do well). In tough times people should increasingly turn to auction sites to sell their unwanted goods and to buy second hand goods rather than new.

As eBay has increasingly disenfranchised the individual sellers in favour of the giant sellers they are being perceived as a store rather than a marketplace. Thus they are treated like all the other stores when ties are tough, and sales suffer.

Meanwhile the giant sellers are finding that other stores, including their own, offer far cheaper alternatives to eBay for selling. eBay has steadily increased fees over the years for both the site and PayPal, creeping up their take rate to unsustainable levels. The big sellers are not that upset to see eBay die as they have other alternatives away from the former dominant marketplace.

Advertising mentality

eBay is desperately trying to capture some of that disappearing traffic with a vast array of Google ads, and traditional media ads. Actually they spend about a third of their gross profit on marketing, while Trade Me spends nothing – relying on organic growth.

As a result people go to eBay via advertisements to buy things from the big sellers, and go to Trade Me because it is the marketplace where they buy and sell things. eBay’s formula is doubly vulnerable as other shops can simply place their own advertisements and steal the customers.

Usability

eBay’s sites are enormous, and they are complicated and difficult to navigate and use. Meanwhile Trade Me has managed to maintain the essential simpleness and usability, with a the cartoon-like nature.

eBay.com’s increasing push for “fraud protection” to the critically flawed Paypal payment system has made it harder to buy, and harder for sellers to guarantee they will get their money. With Trade Me payments are via bank to bank deposit, or, increasingly, direct credit card transaction.

Meanwhile eBay has scores of MBA’s/product managers/marketers that all, it seems, want to expand features. That means the site (feels like it) has no single owner, and the resulting complex mess is a travesty..

Meanwhile eBay has, it seems, wildly over optimised the site for Google, and lost something along the way. e.g. Look at the page title of the eBay.com.au page displaying the results of a search for all items based in Australia:
eBay page header

I have no idea what this mens, but I didn’t come to eBay to buy women or men.

I could go on at some length on the usability differences between the sites, but I will not. There are not too many people that use both sites, but I encourage you to just try listing an item on eBay, and then try listing one on Trade Me. The difference is stark.

About Lance Wiggs

@lancewiggs
This entry was posted in auctions, Internet Business, NZ Business, Trade Me and tagged . Bookmark the permalink.

11 Responses to Trade Me trounces eBay, and eBay is in real trouble

  1. Lance
    Excellent piece.
    Maybe it’s time for TradeMe to revisit the idea of trying on the Australian market.
    cheers
    Bernard

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  2. Marshall says:

    Nice post Lance,

    Simplicity is a surprisingly difficult thing to get right.

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  3. Craig Howe says:

    Agree also that this is a nice article. These ebay to TM comparisons are always interesting, especially with your expertise in this area.

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  4. Pingback: En Avant » Blog Archive » eBay versus TradeMe - what eBay's doing wrong

  5. Well written – I too would be interested to see a Trademe push into Australia, but it seems difficult to imagine…

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  6. Kurow says:

    Nice piece and a good perspective. From a NZ perspective we must remember that trade me remains a domestic market and e-bay does gives us an international opportunity to both buy and sell treasures.

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  7. Lance,

    As ever a clear view that the heart of what ebay was built on has been lost and the clarity with which Trade me operates is still there (be interesting to see the post Kirk era for Trade me!).

    However I could not help but highlight the slight misnomer that Trade me does not advertise.

    There is considerable Google Adwords investment by Trade Me and in addition there has been offline advertising for both Trade me property and Trade me jobs.

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    • Lance Wiggs says:

      Fair cop – clearly I have been spending far to much time offshore. Still – The percentage of adspend versus GP by Trade Me is far far lower than that of eBay.

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  8. Pingback: Well done Trade Me, but the threat remains « Lance Wiggs

  9. multitrim says:

    Great post.

    Perhaps I can add to this that the best way to guard against being ripped off by online sales or auctions is to use an online escrow company. Although it does add some cost, that will take uncertainty out of the transaction.

    For my money, the best bona fide online escrow (and there seems to be ten fraudulent escrow sites for every bona fide one) is probably Escrow.com (http://escrow.com). In fact, it’s the only one that eBay recommends.

    Take care,

    Ulf Wolf

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  10. Trade Me USA says:

    WOW , What if trade me came to the US?
    I recently purchased trademeusa And have been building a “trading” place, After reading this informative article I may do a couple things a little different.
    Thanks for the great info

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