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In July 2007, Simon Russell of iAuctionShop Ltd was approached for comment by Reuters journalist Jennifer Tan. The resulting article is reproduced in full below with the full permission of Reuters Inc. Please direct any relevant queries to Simon Russell or Jennifer Tan directly.

Anian-eBay cedes share to Amazon as Web merchants migrate

By Jennifer Tan
 
SINGAPORE, July 25 (Anian) - Internet merchant Mimi Kriel is considering
ditching eBay Inc. <EBAY.O> as an online sales channel after seven years of
selling her wares - ranging from European vintage linens to bath salts and oven
mitts - on its Web site.
 
Kriel, based in Georgia, started selling more on Amazon.com Inc.<AMZN.O>
two-and-a-half years ago, after struggling with the online auction giant's high
listing fees, dismal customer service and relatively complicated transaction
processes.
 
"I'm looking at withdrawing completely from eBay, as soon as it's feasible from
a financial point of view, probably within the next year," Kriel said.
 
"It's very sad, because we used to be one of eBay's biggest cheerleaders - it's
where we started our online business, it's where our roots are. But now, doing
business on eBay is just so frustrating."
 
Kriel joins a growing list of Web-based merchants migrating a significant
portion of their merchandise from eBay's marketplace to Amazon's third-party
outlets, drawn by higher selling prices and lower costs.
 
A recent survey of Internet merchants, conducted by Anian, a Reuters business
that tracks industry trends for institutional investors, showed eBay has been
losing market share to the Internet retailing pioneer for some time.
 
"Sell-through rates increased for a handful of vendors on eBay we contacted in
June, but the majority continue to see deterioration, and virtually all believe
the long-term trend is down," said Anian Principal David Eller.
 
"eBay remains the dominant marketplace for auctions and online sales in two core
categories - collectables and motors, but Amazon is clearly now the preferred
third-party channel for online retailers where the categories benefit from
Amazon's brand recognition."
 
Datamonitor analyst Alex Kwiatkowski agreed. "Merchants continue to seek the
best virtual location through which to sell their wares, and whereas in the
past, eBay was head and shoulders above the competition, this position appears
to have changed."
 
This decline was reflected in eBay's second-quarter results. Last week, it
reported that users posted a total of 559 million listings - including both
store and auction listings - in the June quarter, a 6 percent fall from the 596
million listings posted in the year-ago period.
 
Auction listings - its core business - slumped to 480 million in the quarter,
down 6 percent from 509 million in the previous quarter and 2 percent lower than
the year-ago's 490.5 million.
 
But net income rose 50 percent to $376 million, or 27 cents per diluted share,
as revenue for auctions and fixed-price shopping grew 26 percent, breaking out
of the 22-24 percent range in the prior four quarters.
 
"eBay's financials still look good because it continues to charge its sellers,
but the underlying numbers are poor - the number of its active users is weak,
and that's a trend that's concerning," said Jonathan Garriss, the executive
director of Professional eBay Sellers Alliance (PeSA), a trade association
dedicated to eBay's top sellers.
 
eBay's active users - those who bid, bought or listed an item in the past year -
was 83.3 million in the June quarter, flat from the March quarter and up 7
percent from a year ago.
 
"eBay cannot keep raising its prices for sellers - it has to grow its listings,
otherwise, all this will impact its bottomline. It's not a question of if, but
when, this will show up in its results," Garriss added.
 
TURNING THE TABLES
 
In contrast, Amazon reported a quarterly net profit that more than tripled to
$78 million, or 19 cents a share, overnight, surprising Wall Street and sending
its stock up more than 20 percent. It also raised its 2007 sales and operating
earnings outlook.
 
"If you look at the trend of both companies' growth rates, you will see that
Amazon's rates are stable or slightly rising, while eBay's are falling," said
IDC analyst Karsten Weide.
 
According to IDC data, Amazon posted annual expansion rates of 31 percent, 23
percent and 26 percent respectively between 2004 and 2006. In the same period,
eBay registered growth of 51 percent, 39 percent and 31 percent respectively.
 
"Amazon may indeed slowly turn the tables on eBay, and it might be more able
than eBay to extend its business with new initiatives, but only time will tell.
The market seems to see it that way though - Amazon's PE ratio is 117 times
while eBay's is 34 times," Weide added, referring to price-earnings ratios which
reflect how the market values a stock.
 
Amazon's shares hit an all-time high of $75.35 on July 13. Its stock has surged
82 percent year-to-date, compared with a meagre 10 percent gain for eBay.
 
Meanwhile, online merchants complain that eBay has done a good job of alienating
them.
 
Kriel is put off by what she describes as abysmal customer service. "eBay has
lost track of the fact that sellers are its customers. Sellers are the reason
that buyers come to eBay. But eBay seems to treat its sellers with complete and
utter contempt or indifference," she said.
 
Arkansas-based Gary Richardson, who runs an online business selling sports
goggles and sunglasses, said he gets better prices on Amazon. He lists his most
profitable wares on Amazon's virtual stores, the second-most profitable products
on his Web site and the least-profitable items on eBay.
 
"It's less efficient to sell on eBay - it costs me $39 a month for a store on
Amazon, but $50 a month for a store on eBay, and on top of that, you need to
re-list your store items every 30 days, which means extra charges," he said.
 
"There are also fewer issues with an Amazon customer - Amazon vets and qualifies
all its sellers and buyers, so you don't have to worry about non-payment. You
don't have that level of confidence in buyers on eBay."
 
Two weeks ago, iAuctionShop, a U.K.-based pottery and porcelain retailer, bit
the bullet and pulled out from eBay, after starting the business there three
years ago and showcasing as many as 6,500 product lines in 2005. It now sells
most of its items on its Web site and Amazon's virtual stores.
 
"It was a very straightforward decision to make in the end. Buyer apathy,
ridiculous pricing expectations, fraud, ever-increasing fees and tinkering from
eBay's strange management team combined to make the profitability of the eBay
marketplace woefully poor," iAuctionShop managing director Simon Russell wrote
in a Web posting.
 
LONG-TERM TREND
 
eBay's loss of market share to Amazon is likely to be a long-term trend, said
Brad Schepp, who co-authored the books "eBay PowerSeller Secrets" and "eBay
PowerSeller Million Dollar Ideas" with his wife, Debra.
 
"Sellers are diverting their resources to Amazon, and that's a wave that will
continue - nothing will stop that. It has to do with the maturation of the
market," Schepp said.
 
"eBay is where you learn your basic business principles, grow your customer base
and build your brand, a place where you supplement your income with some sales.
But if you want to support your family with e-commerce, you need to sell on
places like Amazon or have your own Web site - eBay is not designed for very
large e-commerce businesses," Debra added.
 
Indiana-based Web merchant Jo Flora, who retails chocolate-flavoured Chai tea
and yard art, believes buyers now prefer fixed-price marketplaces like Amazon to
auction sites.
 
"I think the bloom is off the auction rose. Society is geared more and more
toward just-in-time solutions and buyers seem more inclined to find what they
want, buy it, and move on."
 
Fixed-price listings will be a significant long-term source of growth for
Amazon, which has been aggressively courting third-party merchants, said Michael
Jones, vice-president of business development for ChannelAdvisor, which provides
software for e-commerce retailers.
 
Amazon said third-party business - which helped boost its sagging margins -
accounted for 30 percent of worldwide sales in the second quarter and should
become a meaningful part of its future operations.
 
"Amazon has succeeded in luring more third-party retailers onto its service,
which may be partly why sales increased by 35 percent year-over-year in the
second quarter. This is well above IDC's forecasted annual growth of about 25
percent for the digital marketplace at large in 2007," said Weide.
 
((Reporting by Jennifer Tan at Anian, Email: jennifer.tan@reuters.com, Reuters
Messaging:
jennifer.tan@reuters.com@reuters.net
; Tel: +65 6403 5660))
 
For more information on Anian Research, please contact 1-800-514-9022 or visit
www.anian.com.
 
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Wednesday, 25 July 2007 22:10:24ANR [nANR431a  ] {C}ENDS

 

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