Positive Pruning
Whitman attributed the solid quarter, in part, to more product listings turning into actual sales on eBay's site. The company's core auction business had suffered last year from sellers dumping slow-selling and patently unwanted merchandise in their eBay stores, as well as pricing some items too high for eBay's bargain-hunting audience. The result was a poorer experience for buyers and inventory that sat on the site far longer than desired, Whitman explained.
Last spring and summer, eBay raised fees by roughly 6% in order to encourage merchants to sell items people want and to price them to move (see BusinessWeek.com, 7/19/06, "Will eBay Fee Hikes Recharge Growth—or Drive Away More Merchants"). So far, the plan seems to be working. The site saw declines in the inventory that languished in eBay stores before selling or that didn't sell at all. "We are moving toward a better eBay marketplace," Whitman said during the call, cautioning that there was still work to do this year. Company CFO Bob Swan said that conversion rates have yet to reach their 2005 levels, but that they markedly improved since 2006.
Indeed, focus on the end customer is always a sound strategy. Despite the uproar from the eBay seller community, eBay did right for the customer, and are rewarded in the stock price. Quite a lesson for everyone in the e-commerce space.
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