Amazon, Etsy, eBay and the eCommerce Land Grab

July 25, 2008

With much doom and gloom pervading comment about eBay, it’s easy to forget that ecommerce is still a frontier. The IMRG forecasts year on year ecommerce growth (in Britain, Europe, America and Asia) all the way to 2012. And even the very real threat of recession in the UK and US doesn’t seem likely to dent that. Even though eBay is languishing, Amazon has proved that the old guard can still find accelerating growth. The ecommerce land grab is still underway and there’s everything to play for.

With that in mind, an article from Y Combinator (a respected venture capitalist firm) called ‘Startup Ideas We’d Like to Fund‘ makes for interesting reading. Not only does the piece prove that there’s still money out there for winning ideas but the comments regarding online auctions will be familiar to eBay sellers:

“Online auctions have more potential than most people currently realize. Auctions seem boring now because EBay is doing a bad job, but is still powerful enough that they have a de facto monopoly. Result: stagnation. But I suspect eBay could now be attacked on its home territory, and that this territory would, in the hands of a successful invader, turn out to be more valuable than it currently appears. As with dating, however, a startup that wants to do this has to expend more effort on their strategy for cracking the monopoly than on how their auction site will work.”

Y Combinator thinks that eBay’s dominance can and should be challenged. But it’s the belief that only the monopoly stands in eBay’s favour that should be most disquieting. eBay doesn’t have brilliant marketing, a superior product or a vibrant culture of innovation to protect it from an onslaught, it would seem.

One company that certainly can’t be criticised for lacking innovation is the crafts marketplace etsy, which has been in the news this week. Chad Dickerson, a former Yahoo executive, is joining etsy as Chief Technical Officer. Much of the coverage, mindful of Yahoo’s current difficulties, make much of this being a blow to Yahoo. And while that’s true, it’s also a huge boost for etsy: they’ve hired a talented operator from a big firm and that can only a be a vote of confidence. Even before this, etsy has been encroaching onto eBay’s territory and doing it with style, inventiveness and generating not a little admiration.

What does all this mean? Whilst eBay is struggling to find a little bit of ecommerce growth, expending a great deal of energy tinkering with feedback, search and fees, Amazon is successfully taking a good chunk of the fixed price action and attracting professional eBay sellers. Auctions are, it seems, up for grabs and yet eBay isn’t defending this flank and is concentrating on the faster growing But It Now business. Critically, eBay seems to be losing the battle: Amazon is growing faster than ecommerce and eBay isn’t. As for etsy, they’re a shining example of a specialist site taking some of eBay’s action and looking at a bright future.

eBay Inc. might be enjoying great results from Skype and PayPal but meagre growth in the marketplace business should be sounding alarm bells. eBay’s challenge is not just defending existing territory but squaring up to the frontier again and aggressively joining the land grab. Regrettably nothing in the Q2 results, report or investor call suggested that was the plan.

Dan Wilson is a writer and consultant and the bestselling author of ‘Make Serious Money on eBay UK’.

Written by Dan Wilson · Filed Under Ecommerce, Featured | 22 Comments