In a reprise of his pledge to change a little over a year ago, eBay CEO John Donahoe reiterated on Wednesday that the company must adapt to new e-commerce market dynamics and must be more hands-on in managing its online marketplace.
Under increasing pressure from rivals like Amazon.com, eBay has seen its dominance in e-commerce diminished in recent years, as both buyers and merchants seek new alternatives in online shopping.
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"The [eBay] marketplace hasn't kept up with competition, nor customer needs," he said at eBay's meeting with financial analysts at its San Jose, Calif., headquarters.
eBay has been a victim of its success, which has made it hard to implement changes needed to take advantage of future opportunities. "We were trying to protect our past," he said.
In 2008's fourth quarter, the Marketplaces unit saw its revenue decline 16 percent, compared with the same quarter in 2007, while gross merchandise volume declined 12 percent. Unique monthly users also dropped year-on-year.
eBay began strictly as an online auction site but has since become more diversified, allowing the sale of fixed-price items and letting merchants open "stores."
It also got into the online payments business with its acquisition of PayPal, which generates about one-third of the company's revenue, and into Internet telephony with Skype.
Along the way, Amazon.com has expanded its focus into eBay territory by allowing merchants to sell their products from its Web site and providing e-commerce services, like fulfillment.
Now eBay will take a more hands-on approach toward its marketplace rather than simply letting merchants and shoppers work out their differences, trusting in the collective wisdom of its community.
"We're moving to a more managed marketplace," said Donahoe, who took over as CEO from Meg Whitman in March 2008.
Those words should please those merchants who have complained in the past that eBay has been lax and timid in enforcing rules, which in turn has caused trust in the marketplace to erode, scaring away shoppers.
A more managed marketplace doesn't mean eBay will become an online retailer like Amazon.com, Donahoe said. "We'll focus where we can win. We're not a retailer. We'll focus on the secondary market," he said. That means its historical sweet spot of used, hard-to-find items, as well as less-unique products that are a notch below the season's new releases, he said.
eBay will also focus on providing a wider variety of shopping "formats," beyond auction items, fixed-priced products, and classifieds, for a variety of devices, he said.
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