Further, eBay's gross merchandise volume - the amount of goods passing through eBay's various marketplace platforms -shrunk by 22% in the last quarter (Buley, 2009).
The company had misjudged the potential compatibility between Skype and the Marketplace business (Burrows, 2009). EBay sellers were uninterested in phone chats with customers (Barret, 2009). Although the company has announced that it will spin off Skype via an IPO, next year, the economic environment may make this difficult.
eBay sellers are angry over fee increases that favor fixed-price sales. Those users also are incensed generally over eBay's decision to place less emphasis on auctions. (Burrows, 2009). Further, sellers have been upset with what they believe are poorly conceived ratings policies that unfairly revoke their ability to conduct business on eBay (Klein, 2008).
eBay does a very poor job of controlling fake and illegal auctions. This negatively impacts customer satisfaction with the service and invites lawsuits with vendors such as the recent court battle with L'Oreal.
eBay's recent poor performance may be more than just a sign of the economy; online auctions may be losing their appeal. The company is trying to diversify into fixed-priced electronic commerce, but appears to be throwing the baby out with the bath water. Further, the company is plagued by constant fraud. Customer anger and frustration with the company's transition and its inability to police its sites are posing significant danger to the company's brand. Finally, eBay may be stuck with Skype, like it or not.
Recommendation # 1: Improve Execution of the One-Stop Shopping Strategy
The one-stop shopping strategy appears to be a good move on eBay's behalf. It provides diversification should online auctions continue to lose their appeal and it offers a way for eBay to differentiate its site by providing more ways to purchase products than other online retailers. And, targeting the secondary market should be a better option than going after a primary market dominated by Amazon.com.
However, the execution of the strategy needs improvement. Most notably, eBay needs to protect its auction business while adding fixed-pricing. It needs to stop using fees to favor fixed-price sales and it needs to do more to support small customers who are the back-bone of its auction service rather than trying to get rid of them through poorly conceived ratings policies. Although the site will provide one-stop shopping, it must accommodate the various requirements of all the types of suppliers who participate. Therefore, eBay should segment its various sellers and develop pricing and policies that suit each individual segment. Further, eBay might consider developing different sections of its Web site for auctions and for fixed-pricing. This is because eBay is so heavily branded as an auction company. The addition of a separate section would permit branding for fixed-pricing.
Recommendation # 2: Do More to Remove Fake and Illegal Auctions
Fake and illegal auctions ought to be a top priority for eBay. They negatively impact customer satisfaction and can destroy eBay's coveted brand name which is one of the company's major assets. One can't help but wonder if fraud is the root cause of the decline in auction popularity. In addition, illegal auctions can result in costly litigation, and even when won, are an unwanted distraction and a source of negative publicity.
To combat fraud, eBay should take a number of steps. First, it needs to invest more in data mining technologies that detect fraud at the content level. Second, the company should pursue prosecution with a vengeance; account suspension is not enough and there should be a zero tolerance policy. eBay should publicize these efforts so that its sites becomes known as the worst place on the Internet to commit fraud. Third, the company needs a stricter certification process for sellers. Fourth, eBay needs to immediately respond to all customer complaints concerning fraud.