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In the 1990s and early 2000s, eBay led the e-commerce pack. With its communities of buyers and sellers, engaging in transactions with one another, usually using auction-style listings and bidding, eBay helped consumers find and sellers get rid of novelties, antiques, and items that might never show up in more traditional retail stores.

But the company has been struggling, confronted with an increasingly competitive online environment that offers ever more choices and opportunities for bargains. The industry giant Amazon.com attracts customers with its fixed price listings and free shipping, though its stock dropped 6 percent in the past year. Such a decline may seem bad, but eBay’s stock dropped 43 percent.

Thus, eBay is changing its strategy in an effort to help buyers and sellers. Making 25 million users happy is a serious challenge though because the buyers’ and sellers’ objectives are so diverse. Consider two eBay sellers as an example: One seller moves large volumes of the same product, such as electronics, which have easy-to-find suggested retail prices. The second instead offers unique items without a specific intrinsic value, like collectible action figures.

When eBay decreased listing fees but increased the commission it received when the item sold, it benefitted the large volume sellers . But for sellers of more unique items, the commission increase hurt. In another policy change, eBay dropped the listing fee on fixed-price auctions to 35 cents and allowed sellers to list items for 30 days instead of seven. This change also benefitted the large volume sellers, but it attracted many more sellers, and thus crowded the listings and increased competition on the site.

According to eBay, the future is in overstocks and out-of-season merchandise. Antiques and used items may be popular for customers, but the site anticipates that these listings will dwindle as it gears more toward fixed price listings and higher commission structures.

Discussion Questions:

1. Who benefits and who loses from eBay’s change in strategy?

Geoffrey A. Fowler, “Auctions Fade in eBay’s Bid for Growth,” The Wall Street Journal, May 26, 2009.

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