Enthusiast sites fight for slice of eBay 'community'

The auction giant is too commercial, say critics. But are its rivals a threat? Rob Griffin reports

At a time when the only way to sell unwanted items was through the classified sections of local newspapers, the site quickly captured the public's imagination. Today there are 181 million registered users around the world.

But in recent years eBay has changed. The scent of success has attracted businesses - small players and international giants such as Vodafone - that are hungry to access the potentially huge customer base.

Recently published figures show that more than 68,000 people in the UK use eBay sales to generate at least a quarter of their income - the highest level in the European Union.

Hellen Omwando, a principal analyst at Forrester Research, believes the number of businesses using the site may deter ordinary consumers."People don't like it because it is distorting the whole notion of community," she claims.

"The trust relationship has always been between consumers, but once businesses get involved then the community spirit becomes tenuous. It's important that eBay doesn't isolate its core base which is people trading with each other."

The success enjoyed by eBay and disillusionment with the corporate world muscling on to the scene, has led to the creation of an increasing number of smaller, more specialist online auction sites.

These cater for a range of enthusiasts, for example in video games, motorsport memorabilia and radio-controlled models. While some are operated by businesses, others are run as little more than a hobby.

Five years ago, keen fisherman Alan Sargeant, from London, started an online classified adverts site (www.tackle-trader.com) to enable anglers to buy, sell and swap equipment.

Although he has sold advertising space to companies, the system is free to the public. It encourages visitors to talk online about their fishing experiences - a key way to establish a hardcore following.

"I have been into fishing since I was a little boy and thought it would be a great idea to have a platform enabling people to trade with each other online," explains Sargeant. "The system is now fully automated and has become very busy. For people looking for a particular reel or rod, it's a really good place to start."

Sargeant went on to set up a fishing-related auction site (www.alltackleauctions.com) which he hopes to be relaunching over the next couple of months. "The site is also free, although I will be accepting commercial ads," he says. "I'm not looking to be an internet millionaire but if I can get a holiday out of it a year for the family that will be great."

Considering eBay's success, it's surprising that few competitors have mounted a serious challenge. Its principal rival, QXL Ricardo, was an early star, but sank when its performance failed to match City expectations. However, it has now returned to prominence.

Mark Zaleski, QXL's chief executive officer, says the company is focused on serving the needs of individuals, rather than businesses. "We're looking for communities rather than companies because the latter drown out the little guys," he says.

To achieve this, the company is setting up joint ventures with established players in different marketplaces. Earlier this year, for example, it announced a co-branded tie-up with Johnston Press, the UK newspaper group.

"We know we're not going to outspend eBay in marketing, but this is a way for other companies to marry our expertise and their member base," adds Zaleski.

However, Hellen Omwando doesn't believe that the likes of QXL will provide the stiffest competition to eBay. Instead, relatively new entrants to the market, such as Yahoo! and Amazon, she believes, will pose the biggest threat because they ahve the scale to compete.

"Both these companies have their own online auction portals and the capability to give eBay a run for its money. They have the audience, the technical capability and potential to rope in partners," she added.

As for smaller, more specialist players, Omwando believes that's how they will stay. "To succeed in the online auction market you need to have a huge number of people participating," she explains. "If you have a niche audience you can target specific groups, but your growth potential will be limited."

Charlie Coney of eBay, agrees that businesses have become a significant presence on the site, but rejects any suggestion that this deters the average person.

"You get the choice on eBay to buy a phone, for example, from Vodafone, a small seller or from someone who is selling it themselves," he says.

"It is your high street. There are the large stores, but also the independent traders. That mix has made it a success."

While not dismissive of competition from specialist operators, Coney believes eBay's global presence provides a clear barrier to entry. "We'd certainly watch such developments closely, but the success of eBay is partly due to the network effect," he says.

"If you are selling an item you want as many people as possible to look it. Similarly, if you're buying something then you want to go to stores which have the best selection. On ebay.co.uk there are some 3 million items on sale at any one time. It has critical mass and a large, vibrant, thriving community," Coney adds.

Online auctions: benefits and pitfalls

Online auctions can be a terrific way to find and buy rare, collectible items or snare cut-price bargains - but they can also be potentially disastrous for those unlucky enough to fall victim to rogue sellers. These auctions operate on the basis of trust.

This means you can't actually do anything to force the seller to part with the goods or the buyer to hand over the money. In the vast majority of cases sites will make it clear that any transactions won't have anything to do with them; they are merely providing the marketplace in which trades can take place.

"It is important to know whether you are buying from a private seller or a trader who is acting as a business," says a spokesman for the Office of Fair Trading. "You have fewer rights when buying from private sellers."

To help potential buyers decide whether to take a risk, many sites will operate a ratings system, where previous buyers are invited to post comments about their experiences with the seller concerned.

Consumer champion "Which?" recommends beginners stick to buying low-value items from sellers with good ratings, checking how much postage you'll have to pay and not to bid more than items cost in the shops. "It's important to do your research before you commit to buying anything," "Which?" says.