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, 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:

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