Internet December 22, 2009, 10:41PM EST

EBay's Last-Minute Delivery Push

How eBay is working to get more on-time Christmas deliveries and shed its yard-sale image

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Ten days before Christmas, Patricia Curry placed two online orders for last-minute gifts. A GPS device for her mother arrived from Best Buy (BBY) with days to spare.

With time running out, Curry was still waiting on Dec. 22 for the CD she ordered for her husband from eBay (EBAY). "Sometimes on eBay you just don't know what you're getting," says Curry, a resident of Frazer, Pa.

Her assessment speaks to the order-fulfillment problems bedeviling eBay in the heart of the holiday selling season. As auction sales of secondhand goods have dwindled and large liquidators of new products have moved in, the e-commerce pioneer finds itself competing more closely with Amazon.com (AMZN) and Wal-Mart (WMT). It also means eBay doesn't have as tight a control of its supply chain as rivals. "Amazon has seen a lot of growth because of its practices that put the consumer first," says Colin Sebastian, an analyst at Lazard Capital Markets. "It's difficult for eBay, which is not a retailer, to compete."

EBay's expansion into selling new products has brought in more customers who expect cheap, fast delivery; flexible return policies; and attentive customer support. Those have been tough demands for the company to achieve, and could be affecting the site's popularity. In November, eBay's online visitors dropped by 8%, to 51.2 million, compared with a year earlier, according to Nielsen NetView. During the same period, Amazon's visitors rose 6% to 60.9 million.

Now, working with its patchwork of sellers, San Jose-based eBay says it's speeding delivery times and improving service. In the past year, the e-commerce company has created new incentives for its sellers to improve fulfillment, offering financial discounts and better placement in search results on the site to merchants who get the best ratings from customers.

Reliability Goal

In September, eBay added shipment tracking codes for merchants to use on the site. That gives sellers a way to prove they shipped a package on time in cases where a delivery service like FedEx (FDX) or UPS (UPS) is late. "This is part of the whole picture of [eBay] getting more involved and more controlled like Amazon," says Dan Mordente, an eBay seller since 1996.

It's also part of Chief Executive John Donahoe's plan to increase the perception among shoppers that eBay is a reliable destination. "I've got investors who are really pushing us to market [the new incentives] aggressively this fourth quarter," Donahoe said during a September interview. Instead, Donahoe plans to hold off on a marketing campaign about customer service until 2010.

Hanging in the balance is whether eBay can shed its yard-sale image and compete toe-to-toe with some of retail's biggest players. Online holiday sales have heated up as snow fell across the Eastern U.S. this week, as many consumers who were stuck at home shopped online instead. Internet sales grew 13% during the weekend of Dec. 19 vs. a year earlier, according to data released Dec.