Experts: EBay’s Competitors Look for Pure-Play Edge

Speaking strictly hypothetically — it is, after all, one of the few consistently profitable pure e-commerce companies around — if EBay (Nasdaq: EBAY)were to disappear tomorrow, there would be plenty of competitors to grab up the online auction giant’s customers.

Had it never existed, however, life on the Web could be drastically different. Experts tell the E-Commerce Times that no company has been able to out-do EBay at its own game, but many have adopted the site’s business model — and in some cases, copied it outright — to carve out their own niches.

Steve Telleen, vice president of the Web Site ScoreCard service at Giga Information Group, said it would be hard for anyone to displace EBay, which concentrates the Web’s largest number of buyers and sellers in one place.

Telleen noted that the site got that way by being the first to capitalize on the Web’s distinct differences from the offline retail world, as a medium for matching up customers with similar goals.

“That is why EBay was profitable from Day One, whereas companies that basically tweaked the physical store model for the Web — like Amazon — are still struggling to make a profit,” said Telleen.

Marketplace Matters

“It is significant that EBay doesn’t buy or sell anything. They provide theelectronic marketplace that brings buyers and sellers together,” Telleen added. “However, the Web allows this to happen with certain economies not available in a physical market.”

But he noted that it will take more time for culture and comfort levels to change before the EBay way becomes pervasive in most areas of commerce. The majority of established companies hoping to emulate EBay’s success have yet to use the Web as effectively for two-way communication and interaction, rather than a one-way distributor of information, Telleen said.

Experts note, however, that enough companies have adopted EBay’s principles totransform the way in which buyers and sellers do business.

Going Local and Global

Aberdeen research director Kent Allen said EBay — followed by companies like Yahoo! (Nasdaq: YHOO) and Ubid — have grabbed a huge chunk of the collectibles market through their online auctions.

He added that the EBay effect has reverberated in several ways. Local and regional auction sites have sprung up, for those who do not want to deal with buyers and sellers in other parts of the country due to time lags, familiarity factors and shipping expenses.

Sites like CityAuction.com allow people to sort auctions by municipality — for example, if they live in Seattle, Washington and only want to market items or buy collectibles from people in Seattle.

Allen noted that Craigslist.org started out as a local marketplace in the San Francisco area but is now set up to help people locate items and services in other cities.

Companies in European countries are also forming their own marketplaces with the hope of recreating EBay’s success, Allen added.

Changing B2C and B2B

Online auctioning is also spreading to business-to-consumer (B2C) and business-to-business (B2B) e-commerce.

GartnerG2 research director David Schehr noted that some manufacturers and retail outlets have begun to use EBay and other consumer auction sites to sell overstocked merchandise.

And auctioning is transforming the B2B sector through the use of “reverse auctions,” as companies and individuals respond to requests for proposals for specific services, Schehr added.

Giga’s Telleen said B2B sites such as Plastics.net, serving the plastics industry, and NewView Technologies, serving steel manufacturers and their customers, have shown that concepts started by EBay can be effectively applied beyond consumer goods and collectibles.

Wanna Buy a Patent?

Telleen said that there are even sites, such as Yet2.com, where customers can buy and sell intellectual property like patents and licenses.

Experts say many of these auctioning offshoots have EBay to thank for their inspiration.

“EBay has become the model for all kinds of online commerce,” Telleen said. “They’ve taken the retail model and applied it successfully to the Web.”