It almost sounds like an urban legend. In 1995, a software guy named Pierre Omidyar wrote the basic eBay platform over one long weekend so that his girlfriend could trade Pez dispensers with other collectors. Countless dispensers, beanie babies, Barbie dolls, and Lustreware teacups later, eBay is still the best place to find items you'd otherwise have to stumble across at a flea market.
But as I wrote in January's column, the past 18 months saw a sea change at eBay. Internal focus shifted from consumer-to-consumer sales (c2c) to business-to-consumer sales (b2c). eBay adjusted its service offerings to make it easier for small businesses to climb aboard as sellers.
Now the wind is changing again, though not as dramatically as before. Having completely captured the c2c market in the United States (though Amazon makes a dent in books), and having made a good start on the b2c market, eBay is now focusing on the business-to-business (b2b) market.
It's a slight change compared to the last. The change from c2c to b2c essentially meant redefining their primary revenue source, since sellers generate the bulk of eBay's revenue through fees. The change was also symbolically important, though eBay tried to softpedal that part of the message. Many individual sellers saw which way the wind was blowing and complained vociferously that eBay was losing touch with its roots.
This time, eBay has merely to draw a new buyer demographic – businesses. In addition, they need to continue recruitment of new business sellers, focusing on b2b sellers instead of b2c. Here are four recent shifts in this direction:
1. Heavy promotion of the Business & Industrial category. This is the fastest-growing category on eBay, and the one where most b2b activity takes place. The number of listings has doubled from a year ago, and its gross sales are the 2nd highest after eBay Motors (which does a brisk business in business vehicles). Here you can buy a backhoe, a forklift, or a plastic molding machine as easily as you can skip over to collectables and buy an old milkglass plate.
At industrial and commercial trade shows and in related journals, eBay has been heavily promoting this category, both as a way to liquidate surplus equipment and as a place to get fantastic bargains on new equipment.
2. Introduction of new financing services. So how exactly does a small business buy a $75,000 forklift? Up until last month, they'd have had to get a bank loan or pay cash, but eBay just has introduced business financing for items over $2000. Sellers pay no final value fees on financed sales, and all the money comes at once to their PayPal account, fee-free. Buyers pay monthly installments to eBay's go-between, Direct Capital. It's a shrewd move on eBay's part, since it reduces entry barriers for both buyers and sellers of commercial equipment. Early reports on the system have been quite positive.
3. Promotion of the services categories. This is brand new and has the flavor of an experiment rather than a marketing strategy, but strong growth makes it worthy of comment. Among its existing sellers, eBay has started to promote the listing of services, rather than physical goods. Although still very small, the listings have grown quickly from nothing, and you can now find auctions for b2b services such as small business health insurance, regulatory compliance consulting, and programming jobs, mixed in with c2c offerings such as custom baby blankets and virtual girlfriends. Although still questionable, this could be a real growth area in the coming year if eBay nurtures it properly.
4. New services for business sellers. eBay has partnered with Monster to help businesses find employees, but that program is in too early a stage to tell if it will be useful. They've also made it easier to integrate UPS and USPS shipping into the checkout process, which will help all sellers.
The death of Pez? Well, that's been greatly exaggerated. eBay uses the word "evolve" to describe what happens within its marketplace. Sellers "evolve" the platform by selling things eBay never expected, creating new categories that eBay just formalizes into their structure. These focus shifts are really just eBay following the money. eBay does not create markets. They just move resources to assist and enable the markets that seem most lucrative.
There will never be a time when you can't buy a Pez dispenser on eBay. But we'll see more of these shifts. The first, going from c2c to b2c, was abrupt and came later than it should have, but the company seems on track now that they've gotten used to the idea of change. If they ever lose that, look for a competitor waiting in the wings.
