EBay's Last-Minute Delivery Push

(page 2 of 2)

22 by ComScore (SCOR).

EBay has made progress. Vice-President for Buyer & Seller Experience Dinesh Lathi says its sellers take an average of four days to ship items, and 85% of orders ship within three days. That's an improvement over a year ago, though Lathi won't say by how much. "We are working with sellers to make sure they are better-positioned to meet buyers' expectations," Lathi says.

Beyond the Swap Meet

EBay has come a long way since its origins as one of the first companies selling goods over the Internet in the mid-1990s. "It was a swap meet," says merchant Mordente. Back then, he hawked artifacts from his mother's New Jersey basement. Now the 32-year-old runs an online shoe business through eBay and other Web sites that he expects will book $10 million in sales this year.

On a frigid December afternoon in Brooklyn, about a week before Christmas, one of Mordente's three warehouses is buzzing. Shoe boxes are stacked more than 10 feet high in 30-foot rows. Workers periodically pull boxes and pack them for shipment. Five women sit in front of computers taking phone calls from customers.

The company, called International Railroad Supply, is shipping 1,200 orders per day during the holiday season, up from about 500 a day the rest of the year. Though the company's cut-off date for guaranteed shipment by Christmas Eve has passed, Mordente says he'll try to get all orders placed by Dec. 20 under Christmas trees on time.

Since International Railroad Supply is rated 4.8 stars out of 5 by customers, eBay grants it a 15% discount on the fees it pays for listings and transactions.

Contrast that practice with e-commerce giant Amazon's more systematic approach to order fulfillment. Amazon sells 31% of its products through third-party merchants, but manages them very differently. Rather than rely on customers' ratings to gauge sellers' performance, Amazon uses hard measures such as delivery times and return rates. "EBay is survey-driven; Amazon uses a set of data," says Scot Wingo, CEO of online retail consultant ChannelAdvisor. Amazon can remove sellers from its site that perform poorly on delivery times and customer service.

Courting Retailers

Lately, eBay has been working overtime to lure some of the Internet's most reliable small retailers to its site. Colorado-based eBags, a company that's sold luggage and handbags online since 1999, set up shop on eBay in November. The companies linked up after months of negotiations, says eBags co-founder and Senior Vice-President Peter Cobb. "They wanted to balance some of their individual sellers with big retailers," he says. EBay offered favorable pricing, placement, and control over the look of eBags' virtual storefront, says Cobb.

EBay is also pushing sellers to offer free shipping. The company has nothing as comprehensive as Amazon's Prime program, which offers customers two-day shipping in return for a monthly fee. Yet Lazard analyst Sebastian says he's seen an increase during the past year in the number of eBay items bearing free shipping offers.

While eBay can improve the reliability of its sellers, many say the company faces an uphill climb. "They started as an auction site, but they are now seen by most people as a retailer," says Larry Freed, CEO of market researcher ForeSee Results. As eBay grows up, it's being held to increasingly tough standards.

Douglas MacMillan is a staff writer for BusinessWeek in New York.

Business Exchange

Track and share business topics across the Web.