eBay has announced it will allow sellers to set up their own storefronts on its website.
eBay, the online auction market leader, announced on Friday that by next quarter it will allow sellers to set up their own storefronts on eBay’s website. The announcement is a clear indication of eBay’s general drive into the fixed-price commerce sector. A year ago, eBay acquired Half.com, a site where sellers list items like books, CDs, and videos at set prices. EBay recently announced that over the next year it will integrate the separate trading platforms of the two sites into one. Last November, eBay instituted a fixed-price offering on its own site, via its Buy it Now feature.
eBay’s move into the fixed-price sector will help the company compete against Yahoo! and Amazon, which both target small merchants eager to have an online presence.
eBay’s storefronts program will provide the online auction site with additional revenue, in the form of listing fees or fixed subscription fees. Such fees will contribute to the company’s goal of achieving $3 billion in annual sales by 2005. Additional revenue, however, is not the main advantage of the storefronts program. eBay stands to gain the most in the areas of competitive positioning (against Yahoo! and Amazon), and fraud protection against offline transactions.
The so-called ‘gray market,’ in which buyers and sellers meet on eBay but conduct the transaction offsite, thereby robbing eBay of the transaction fee, has become an increasing problem for eBay. Salomon Smith Barney reported in a recent research note that such offsite transactions have resulted in the loss of 10-25% of gross merchandise sales. By providing sellers with an incentive to stay on the site, eBay will reduce the amount of revenue lost through offline transactions and will in fact increase revenues through additional fees.
