For several years disgruntled sellers have been expounding on the future of eBay. Their forecasts have, for the most part, been somewhat gloomy. I’ve never paid much attention to them, viewing their pontificating as nothing more than the babble of a group of people who probably weren’t going to be successful on eBay anyway.
But within the last months a few things have happened that, when combined, have caused me to give some thought to the direction eBay is headed and to ask - what is the future of eBay? Will it be around five or ten years from now?
The first was a stop on the way home from a fishing trip at a fair-sized flea market that I hadn’t visited in more than two years. The other things were included in several different eBay related newsletters I received over the last couple months.
I love a good flea market. Long before eBay was even a twinkle in Pierre’s eye, I was selling antiques and collectibles at flea markets scattered around a five state area. From late April through mid October, I was set up at a flea market somewhere just about every weekend. While I haven’t actually set up at one since I began selling on eBay, I still spend a lot of time at many of them because they continue to be a good source of inventory for eBay.
The majority of the ones I shop at today didn’t exist ten or fifteen years ago. And, the majority of the ones I set up at, and shopped at, ten or fifteen years ago, don’t exist today. I’ve watched a lot of flea markets start from nothing, grow to maturity, and then gradually die. I’ve watched a small number continue to grow and mature.
In order for a flea market to grow and succeed long-term, it must have four things.
- A Good Location - location will make or break a flea market. The location must be easily accessible and either on, or within a short distance of, a major highway.
- Quality Dealers With Quality Merchandise - For the most part, quality dealers consist of dealers selling antiques and collectibles. Also included are dealers of certain used merchandise that can be purchased at significant discounts from new. Without quality dealers selling quality antiques and collectibles, a flea market doesn’t have a chance of succeeding. (I’m sure I’ll get plenty of argument about that, but in more than 20 years, traveling in eight states, I’ve never seen a successful flea market without antique/collectible dealers as their core sellers.)
- Serious Buyers With Money To Spend - It is also imperative that these buyers be looking for specific items. Flea markets don’t survive if the majority of their traffic is made up of browsers.
- Clean Rest Room Facilities - Pretty self explanatory.
Without all four of these, a flea market really has no chance of growing and maturing. If the location is bad, no one comes. They can have the best dealers and inventory selection in the world, but if serious buyers don’t show up, the dealers don’t keep coming back. They can have all the traffic in the world, but if there isn’t a good selection of quality dealers with quality merchandise, buyers won’t keep coming back. Without clean rest room facilities, no one keeps coming back.
With all four in place, a flea market has an excellent chance to grow and mature.
No matter what stage of growth a flea market is in, the sellers who continually set up there can be grouped into one of four basic categories that I call the antique guys, the used tool guys, the new tool guys, and the t-shirt/sunglass guys.
- The antique guys sell quality antiques and collectibles that eager buyers with money are looking for.
- The used tool guys sell quality used merchandise at prices significantly under what it would cost new that serious buyers who want to find a bargain are looking for.
- The new tool guys sell brand new merchandise, often at prices slightly lower than brick and mortar stores sell them for. Unfortunately, on order to offer much of a savings, the new merchandise they sell is often cheaper brands and/or seconds. No one really goes to a flea market to purchase this stuff, but they may purchase it as they walk past.
- The t-shirt/sunglasses guys sell junk. Their merchandise is often misrepresented, and the sales they do make are often because the kids dragged mom and dad over to the booth, so they buy something to keep the kids quiet and happy.
A flea market can become successful with just the antique guys. In fact, many of the most successful ones consist only of antique guys. Used tool guys don’t cause any headaches, and for many flea markets, they are a vital ingredient in their success.
It’s when the new tool guys start showing up that flea market management must start watching what they are doing. It is tempting to sell space to as many new tool guys as possible because it increased the market’s bottom line. But, while a small number of new tool guys may not detract from the attractiveness of the market, too many of them and the stagnation sets in and buyer attendance begins to fall.
Once a flea market falls into a “the only way to increase the bottom line is to increase vendors” mentality and starts adding as many new tool guys as possible they are in trouble. Attendance begins to fall. Since many of them charge for admittance, revenues start going down and, in an attempt to bring revenue back up they start selling space to the t-shirt/sunglasses guys and look the other way regarding whether their presence adds to, or detracts, from the value of the market.
Once the t-shirt/sunglasses guys show up, the market starts to die. It may take two or three years before it no longer exists. Some may hang on for a few years more, but it’s an irreversible death spiral. The few that do survive long-term do so by surviving on greatly reduced revenues consisting of vendor fees from a t-shirt/sunglass guys and a few low quality antique and used tool guys who can’t afford to pay for the gas to go anywhere else along with the attendance fees they charge the browsers who stumble upon the flea market and decide to take a look. The serious buyers are long since gone.
In reality, when you get down to the nitty-gritty, eBay is nothing more than one large flea market and they face the same problems and challenges that a growing flea market does.
eBay’s initial success came about solely because they managed to have a core group of antique guys along with a few used tool guys, serious buyers with money to spend, and clean rest room facilities all in a great location right from the time they started out. Over time, a few new tool guys saw what was happening and jumped on the eBay band wagon, but, because the number of antique guys and used tool guys continued to grow, initially their presence wasn’t a problem. If that was where it ended, eBay would quite probably continue to mature and grow, just at a slower pace than in the past.
But it didn’t end there. eBay, like so many flea market owners, became greedy. In their need to show ever-increasing profits to investors, they took the easy way out by actively pursuing more and more new tool guys and the first signs of trouble set in.
The new tool guys came in two different variations.
The big time new tool guy usually jumps into eBay with both feet and starts doing business on a huge scale right from the start. In doing business that way, they steam-rolled a lot of buyers who ended up with a bad taste in their mouth for eBay. Taking the short-term view of the problem, eBay opted for the continued revenue from the seller rather than paying attention to customer satisfaction.
Fortunately, eBay has apparently realized that their long-term success depends on keeping the serious buyer on site, and has begun taking tentative steps to rein-in the problem big time new tool guys. Unfortunately, there is a bigger problem looming around the corner that I’m not sure eBay can rectify.
That problem is the second variety of new tool guy - the small time new tool guy. Most small time new tool guys share three characteristics. They view eBay as a route to fast money, they have no idea what how to make money on eBay, and they are extremely lazy.
At first glance, the small time new tool guy doesn’t appear to pose much of a problem. Most of them take the wholesale list, drops shipping, or ebook route. They fail miserably, and quickly move on to other sources of instant riches. However, because of their numbers, their lack of knowledge, and their laziness, they attract eBay’s own version of the t-shirt/sunglass guy.
eBay’s version of the t-shirt/sunglass guy could care less whether eBay thrives and flourishes for the next fifty years, or disappears from the Internet next week. In many cases, he doesn’t even sell on eBay. If he has sold on eBay, he is often just another small time new tool guy who has failed and now decided to tell others how to succeed. All he cares about is making a quick buck and he sees the small time new tool guy as an easy mark.
Recently I received a newsletter from an ‘eBay expert’ promoting a multi-level marketing program targeted at small time new tool guys feeding on their laziness and dream of easy money. This entire concept is pure and simple t-shirt/sunglass junk promoted by t-shirt/sunglass guys. It adds absolutely no value to eBay nor to the poor small time tool guy who falls prey to it. All it’s aimed to do is make a small number of people a lot of money. Sadly, it will also leave a large number of people with a sour taste in their mouth when it comes to eBay.
I received another newsletter promoting a “make-lots-of-money-on-eBay” ebook. I didn’t buy the ebook. All I needed to do was read about how the author tricks potential sellers into clicking on a fake video link in his auction description that adds them to his watch list without their knowledge to know I was looking at more junk from another t-shirt/sunglass guy. Whether the potential buyer figures out what’s going on or not, eventually he is going to be spending his money somewhere other than eBay.
Another newsletter promoted a second “make-lots-of-money-on-eBay” ebook. I couldn’t tell exactly what the “profound” ideas it contained were, but it smacked of keyword spamming using the names of celebrities in some fashion the writer and promoter thought were eBay-legal. I seriously doubt it. Another example of t-shirt/sunglass junk from a t-shirt/sunglass guy.
The list goes on and on.
The people who write this junk, and the people who promote it, are eBay’s version of the t-shirt/sunglass guys, and they pose the biggest threat to eBay’s continued growth and success. The junk they peddle isn’t so harmful by itself, but when it is multiplied by the thousands of small time new tool guys who buy and implement it, the problem becomes huge.
T-shirt/sunglass guys also pose a huge threat to the continued success of numerous other currently successful Internet sites. Some, Squidoo and Craigslist for example, have already recognized the enormity of the problem and taken initial steps to put an end to it on their sites.
eBay needs to recognize the problem and follow suit very quickly or the future of eBay is not good. Upper level management needs to step back and realize that no matter how grand their view of the company they work for, in the end, eBay is nothing more than one giant flea market. And once flea markets let the t-shirt/sunglass guys get a foothold they are doomed to fail.
The serious buyers start leaving to do their shopping somewhere else. When that happens, the antique guys and the used tool guys quickly follow suit. The new tool guys hang around for a while longer, but eventually they disappear too. As each group of guys leave, more and more sellers leave, and soon what’s left is the flea market I stopped at on the way home from fishing.
What used to be a thriving twice-a-month flea market with fifty to one hundred quality sellers and hundreds of serious buyers, now had nine t-shirt/sunglass guys sitting around one booth drinking beer at one o-clock in the afternoon while three browsers checkout out the selection of sweatshirts, sunglasses, t-shirts, and airplanes made out of old soda cans.
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August 17th, 2007 at 6:13 am
Gary,
You have done it again …. another awesome article hitting the nail on the head. I never really looked at (or thought about) flea markets this way, but you are dead on. While reading your article, I started thinking about a few markets around my area and how they have gone downhill and died over the past few years … your synopsis is super accurate.
This should be required reading for all ebay employees, right up to Meg & Pierre (especially M & P!).
… Ron
August 17th, 2007 at 6:41 am
great read. funny how flea markets have almost died in houston. they used to be packed every weekend everywhere but now nothing, probably because of reasons you say, the new m’dse seller and the knock off m’dse - all junk - or counterfeit. just went to one in houston that had TONS of counterfeit toys a few weeks ago.
not sure this applies to ebay. there have been all types of sellers like this for 5-7 years or more. little sellers who work part-time with no profit never seem to die or they die slow, and some bigger ones take longer to realize they arent making a profit either before they get out, or stay in the wholesale channels or the retail marketplace.
i see ebay as a advertising source, period. been making a full time living for 4-5 years from it. selling computer parts to apparel to now music gear. i have shifted not due to ebay, but by finding the best profit margin merchandise, or maybe getting bored with something.
think it just goes to show how tuff biz is anywhere. everything is big chains these days. how many small restaurants survive? not many. most only 6-12 months.
you mention ebooks - most suck - period. i saw your site via the warrior forum, how many successful there? not many. most make $10-100 online a month IF lucky. not many super affiliates - course i think the definition of one varies. i used to be one, but got tired of fighting those traffic sources too.
dean
August 17th, 2007 at 8:25 am
Gary, let me repeat what others have said… an EXCELLENT article. You have hit the nail squarely on the head.
We can only hope that M & P will somehow get the message.
Here in South Florida most of the ‘Flea Markets’ are gone, and all we are left with are your ‘T-shirt/sunglass guys’. And even those markets are dying off fast.
Like you, I never paid much attention to those forecasting a gloomy end to eBay… but my eyes are open a bit wider now.. thanks to your well thought out words.
Thanks
Tom
August 17th, 2007 at 4:28 pm
Great article Gary,
Very thought provoking and some very clever analogies. I too am in South Florida, near PGA, oddly, and I can only agree with the previous poster.
I am an expat Brit living here, but visiting UK regularly…the same thing is happening there. My Dad lives in a small town in the NE of England and he has been complaining for a while that the local weekly market has just gone down hill and all that is left is videos, CDs, Tshirts and cheap junk. It seems its endemic in many countries….. I wonder if that is one of the reasons you are seeing less garage sales in your area too??
sheila
August 18th, 2007 at 4:18 pm
Gary, great analogy. Sadly most of the ebay sellers won’t understand it because they don’t know what a real flea market is. I call the sellers with new stuff vendors. Here in Arizona, the vendors have taken over the venues.
I think it’s important to mention something. At a flea market a vendor pushes out a dealer or home owner. The vendor also attracts a different type of shopper.
On eBay there are categories so shoppers don’t have to see anything but what they want to see. Shoppers don’t have to walk past a hundred vendors to pick through someone’s household items. They also don’t have to deal with the crowds of people looking for entertainment.
This means that those of us who just kept selling antiques and collectibles weren’t really effected by anything they did.
For us eBay is the elephant. They might attract new dealers, but most collectors already shop on ebay.
Looking a little deeper, collectors don’t talk much about getting ripped off on eBay. It happens, but mostly they talk about the deals and the finds.
It’s the people who buy from vendors who get scammed and can’t walk past it. I bought something a few weeks ago and was seriously disappointed. But it was only $30, and when lumped in with all my other purchases not even worth talking about, much less dwelling on.
Most collectors would understand that statement.
The poor schmuck who buys a printer on eBay to save 15 dollars and gets nothing has a much harder time moving past it.
Terry Gibbs
August 20th, 2007 at 4:25 am
Nothing else needs to be said……You said it all here. Once again, you give us something to think about and I for one never really thought about it before….thanks gary
August 21st, 2007 at 4:38 pm
I ditto all!!
August 22nd, 2007 at 9:36 am
Gary I’ll go you one better and expound upon your theory to explain why ebaY has an iffy future with buyers if antiques and collectibles.
You say that ebaY has 4 classes of sellers:
1) true antiques and collectibles sellers;
2) used merchandise sellers;
3) new merchandise ‘at a discount’ sellers; and
4) the junk (T shirt) sellers
I would like to further address especially the first two categories of sellers, the folks who built ebaY and made it into the initial runaway success it was and what got it so much attention.
Let’s talk about *the items* that true antique and collectible sellers actually sell.
Where my idea for my theory comes from is that I come from a family of collectors of antiques and collectibles. My parents both collected antique furniture, antique glassware, some Asian antiques, my father specifically collects antique firearms, some coins, some classic cars, some prints and artwork while my late mother collected quilts, some vintage and estate jewelry, some tea service related items, some porcelain objects of more recent vintage, hand-painted Russian nesting dolls etc…in other words a very broad variety of collecting experience. And those are just my parents interests (I won’t bore you with mine but they’re different than my parents and have varied a lot over time
In addition to growing up in a lot of different auction houses, antique shops, collector shows and flea markets, I have actually worked with and for sellers of collectibles for several years and dealt with customers, dealers and fellow collectors before during and after the ebaY boom. So I think I can offer a little perspective that most folks can’t.
In the 30+ odd years as a family where each of us has collected many different types of things and from my visits to hundreds of sellers shops — real world and online — I have come to see that stuff to collect comes in three categories:
1) The truly rare and perennially desirable items that will be sought out by experienced and new collectors alike (although usually it’s the experienced collectors who buy or win auctions of these items more so than the newbies becuase they command premium prices). This is maybe 10-20% of all the items in existence and is the kind of stuff that gets experienced people who teach others about collecting (the Kovels, Harry Rinker or the more reliable experts in auction houses or on The Antiques Roadshow) really excited and gets media coverage.
2) Items you might fairly call “swing” stuff: these are good quality items that are more subject to whim and fad buying that when they are in favor bring bigger prices and when they are not lose some of their ‘popularity mark-ups’. To me an example of this would be medium quality mass produced mid century modern furniture which used to go cheapish in the 1980s but is now popular probably because it used to be cheap, it appeals to baby boomers (who have the most disposable income and grew up with it) and is touted beyond the antiques and collectibles press and currently coveted by interior designers and featured in those kinds of more mainstream magazines. When a new generation comes of age with its own discertionary spending money, when the price run-ups have run their course and when the mainstream media is onto some other style of furniture a lot of these pieces will no longer go up in value and may lose a bit of value. These “swing” items constitute maybe another 10-20% of what exists to collect.
3) The remaining 40-80% of what is out there is the “garden variety” stuff. This is what is commonly available, is most likely to initially catch a new collector’s eye (and all experts and experienced collectors probably have started out collecting these items and keep only their favorites in their collections) and only increases modestly in price due to the general inflation in the prices of all goods (commodities and collectibles and junk) over time. If these items are broken, incomplete or in rougher condition, they of course are less desirable as they are not difficult to replace and can become the bread and butter of a used merchandise seller (Gary’s 2) category seller). Also the media tend not to get too lathered up about these items regardless of their condition.
The problem as I see it for ebaY and for any other seller of antiques and collectibles is this:
1) There are never enough of the truly premium items for true antiques and collectibles sellers to sell. These items will sell quickly and for good prices no matter where you sell them. The only time a collector can get a deal on these items is when he or she knows more about the item than the seller does. Since ebaY makes it relatively easy for multiple knowledgable and interested buyers to find these items, an ebaY seller should get a fair to high price for items that fall in this category even if the seller lacks the collectors expertise and knowledge.
2) The swing items are subject to wild price swings…these in the context of ebaY auctions are items that sell for wildly different prices in a very short period of time and often come down to lucky (and good) timing of the faddish enthusiasm of a few buyers (usually the least knowledgable pay the premium) to command a high price. But sometimes even a delay of only a few hours means all subsequent identical items sell for modest prices. This phenomenon by the way is not exclusive to ebaY…I have seen dealers with online shops, real world shops and at collector shows wonder why the spike in popularity (and thus salability) of identical items come and go.
3) The garden variety items, the vast majority of collectibles on ebaY are revealed to be more common than even the most experienced collectors expect (as do some swing items) and thus collectors can easily wait for their optimum combination of price condition and features to appear before buying. These sorts of items can sit and gather a lot of dust whether they are advertised online or sitting in the inventory of a real world seller gathering dust that any potential buyer can see.
As far as I know, no one has figured out how to make significant numbers of more of the items in category 1) to satisfy the level of demand. A few people have figured out how to temporarily game category 2) but there is always the risk of having items to sell that have gone out of fashion and becoming the slow sellers that items in 3) generally are.
So when ebaY went and became a publically traded corporation, the only way for them to satisfy shareholders (the audience ebaY is now clearly serving) was to bring on more folks first in Gary’s category 2), then Gary’s categories 3) and 4)
The buyers who built ebaY into the popular site it is will tolerate a lot of Gary’s used merchandise sellers (where collectible items can sometimes be found on the cheap) but frankly they’re just not interested in Gary’s categories 3) and 4)…there are lots of other places selling new commodity merchandise at a discount and honestly no one wants to buy junk. So ebaY as collectors once knew it is overrun with a lot of uninteresting stuff. I liken this for collectors to spending time at a flea market that has been overtaken by sellers of merchandise in categories 3) and 4) where it used to be a good source of items from 1) and 2). It’s a turn-off to see so many irrelevant items even if you can do it in your pajamas 24-7 and without leaving home. So most of the collectors I know who buy are deciding it’s not worth spending their time searching ebaY and looking elsewhere (myself included).
The sellers who are leaving ebaY have been leaving because they know that collectible sellers are no longer a priority on ebaY. They simply can’t provide ebaY with the sheer volume of fees that ebaY needs to keep feeding to its shareholders to keep the shareholders happy, and if ebaY increases its fees to please shareholders it cuts into the profitability of people for whom the vast majority of their items take too much time to sell. So they too explore other options besides ebaY. Also for the remaining collector buyers, they’re not too keen to pay the passed along increased fees on garden variety or out of fashion items, so that drives more paying collectors away from ebaY.
So even if ebaY were to launch an all out blitz of the media that appeals to collectors (collector print publications), a radio and TV ad campaign or what have you, it is going to dawn on collectors that ebaY can’t deliver on its promised so long as ebaY has the shareholder monkey on its back. Besides now that the electronic payment processing site PayPal delivers what shareholders want, the idea of ebaY as a collectors paradise will be marginalized, until a better PayPal comes along and then it will definitely be too late to win back former collectors who were ebaY enthusiasts.
So I’m not optimistic about ebaY. But it was fun while it lasted.
PS I go to a book fair (it sells surplus and damaged new books) near where I live. About 3 years ago, I started seeing copies of paperbacks of various titles on ‘How to make money selling on ebaY’ that you could buy anywhere showing up at discount prices at the book fair (alongside massive quantities of books like ‘The South Beach Diet’), I pretty much knew that the day of collectors being ebaY’s top priority was truly past. So the sleazoids you describe who sell ebooks on ‘How to make money selling on ebaY’ and not actually selling anything but their faulty and dated information hoping to find greater fools to profit from taking over at ebaY do not surprise me a bit.
I also am not surprised to hear that people trying to buy new or decent quality used commodity goods at ebay are getting ripped off or disappointed. I have been disappointed on the latest of my purchases of those kinds of commodities (which I made a little over a year ago), so I avoid ebaY for ‘discount’ commodities as well.
August 22nd, 2007 at 10:24 am
Fascinating, scary, thought-provoking. You have raised some great points about problems with the flea-market positioning of eBay and the normal evolution of this type of venue. However, I also think Terry Gibbs makes some good points. eBay is so diverse and there are enough quality sellers and buyers there that the parallels to flea markets is only part of the elephant. The best thing about eBay flea market is that it is possible to hone in on the market you are interested in without having to stroll by all the junk along the way. The problem then becomes having enough knowledgeable buyers and sellers to stay viable and with that comes the need of introducing and educating tyros in how to negotiate the paths through all the dreck before they throw up their hands and leave. - Mark -
August 23rd, 2007 at 10:09 pm
Gary I like honesty you shoot from the hip and you are right on the money. The problem is eBay is way to arrogant to heed some sage advice. Buyers and sellers like ourselves are savvy enough to also be opportunists. eBay makes plenty of money off of all of us and I for one look forward to more competition in the marketplace. eBay is neither buyer or seller friendly and that will be its downfall.