eBay and Buy.com Sitting in a Tree, Sellers Hate It, Yesiree

Last Updated Jul 14, 2008 3:31 PM EDT

eBuy Parody LogoAuction site eBay and e-tailer Buy.com have a new partnership, according to the New York Times -- and a lot of angry users:
Consumers appear to be tiring of online auctions, and rivals like Amazon.com are attracting more shoppers with fixed-price listings, while eBay has been struggling for growth. To shift toward that model, eBay has struck a deal with the Web retailer Buy.com that allows the company to sell millions of books, DVDs, electronics and other items on eBay without paying the full complement of eBay fees.
That means lots of fixed-price listings from a company that doesn't need to stock its wares because its distributors drop-ship products directly to buyers. The future, at least under new eBay CEO John Donahoe, seems to be dealing with large companies, and not the individual sellers that made the site that rarity among the early dot coms: It became profitable. Many of the small sellers "have uncorked a wave of vitriol on eBay's community forums about this and other changes."

Then again, it's not clear that eBay had much of a choice. Last summer, Buy.com tried to move into the auction space by letting people buy and sell on Facebook. If there was no partnership, then eBay might have seen much of its business, and its revenues, move to other venues, where there may not have been a charge to list an item, whether or not it sold.

And there were signs that the overall way people were doing business on eBay was changing:

eBay's business is still booming -- the company reported net revenue of $2.19 billion in the first quarter of this year, up 24% over the same period last year (that includes revenue from Skype, PayPal, and other eBay shopping businesses) -- but there are signs that trouble may loom in the core business. Fixed price BIN-only [buy it now] listings now account for 42% of the gross merchandise volume on the site, and the fixed price format has been growing at a much faster rate than auctions over the past 6 years.
That leaves a question of just how many people are actually bothering with auction sales, and whether the number is growing or not. I'd like to think that eBay's actions say it all. It's heeding that old rule of politics and business -- follow the money.

But the results could sting in the end. Supposedly, Buy.com has a half million items on eBay at any time, but the sell-through rate is a pathetic 5 percent. That's fine for Buy.com, because it isn't holding merchandise, but the sheer volume of listings -- and a new category of seller that seems to have been created for the relationship -- suggests that there may be no listing charges, or perhaps some relatively small flat fee. Given that the bulk of listings reportedly has hurt visibility and sales of the small sellers in Buy.com's product categories, the result could actually be less total revenue when all is said and done.

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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.