The changing face of eBay

As the auction site toasts its tenth birthday, it is posing a greater threat than ever to high street retailing, reports James Thompson
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This month, eBay marks the 10th anniversary of its operations in Britain. But the online auction giant recently passed another milestone that has received far less attention. Global sales at eBay from fixed-price transactions – up 19 per cent year on year – now comprise 51 per cent of total sales, having edged ahead of auction sales for the first time last month. It is a landmark that high street retailers ignore at their peril. Greg Hodge, the research director at Planet Retail, says: "It [eBay] is a huge threat to traditional retailing." The spectre of fast-growing e-tailers, notably Amazon UK – which launched Marketplace, where businesses or entrepreneurs sell products at a fixed price, in 2002 – also hang over the high street.

But it is eBay which has captured the public's imagination and famous users from Camilla, the Duchess of Cornwall, and Cherie Blair, the former prime minister's wife. There are a plethora of reasons for the changing face of eBay, where 123,000 UK businesses now trade and of which 171 now generate more than £1m in sales every year.

While eBay has generated most of the growth off its own bat, it has also been helped by the seismic shift to, and growing acceptance of, e-commerce. Many online shoppers often now want the instant gratification of a quick purchase and it's fair to say a number view the process of joining and monitoring an auction tiresome. David Smith, the operations director at IMRG, the online research specialist, says: "As soon as they started to break away from purely auction sales, they started dealing with a very large online community that is used to buying and selling products online and therefore you are talking to a committed audience."

The convenience and temptation of shopping on eBay should also not be underestimated. Many buyers also use PayPal, the security system which is mandatory for sellers, and put deposit money into their account. Mr Smith says: "You have in effect got an online wallet of cash sitting in your account so it makes it a lot easier to spend it than to go and draw it out so to speak."

While eBay has no doubt benefited from millions of consumers being comfortable with internet shopping compared to a decade ago, the online powerhouse has introduced plenty of initiatives to attract fixed-price buyers and sellers to its site.

For instance, in September, eBay introduced more prominent fixed-price listing for products, under the "Buy It Now" banner, alongside auctions to give buyers a greater choice of how to buy. In May, it also started to actively promote its "Deal of the Day", which saw one "powerseller" sell out of 2,000 Motorola mobile phones in 50 minutes. And to encourage more sellers to sign up and a further recognition of the importance of feedback, eBay will launch its top-rated sellers initiative in October. This will reward them with better listing positions and discounts in return for them providing high levels of customer service.

Mr Smith says: "The advantage of Amazon and eBay is that they offer the opportunity to sit behind a larger brand to compete with the high street multiples – otherwise small players are just shooting in a wilderness."

The power of eBay has not been missed by the retail community. There are now 13 large retailers and other brands selling direct on the site, including Argos, Schuh, Dell and HP. "It is an additional avenue to reach their customers," says Planet Retail's Mr Hodge, but he believes that retailers, such as Toys R Us, have most to fear from the growth of eBay. However, Mr Smith believes high-street retailers have a "brand legacy" in consumers' minds that will enable them to compete in the long-term both online and on the high street. But whatever its impact on the high street, the story of eBay is only just beginning and all retailers need to wake up to it. Mark Lewis, the UK managing director of eBay, says: "Ten years on, we might have fallen out of love with Pokemon and perhaps The Scorpions no longer have the appeal of yesteryear. However, one thing remains – is still the favourite platform for British shoppers looking for great value and unrivalled choice, to earn some extra money on the side or to make their entrepreneurial dreams come true."

Under the hammer: Sales facts and figures

*The first eBay item sold in the UK was a 3-track CD by German rockers The Scorpions, for £2.89 in 1999

*A digital camera sells every minute for an average price of £23.62

*Every 25 seconds, a handbag is sold for an average price of £16.57

*There are more than 20 million items on sale at any one time on eBay, including fixed-price and auction

*An article of baby clothing is snapped up every 14 seconds, for an average price of £5.79

*Saucepan sets sell every three minutes and their average price is £17.62

*eBay delivered global revenues of $2.1bn in the quarter to 30 June 2009

*964 million items have been sold on eBay in the UK over the past decade.