Auctions on eBay: A Dying Breed

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EBay executives say auctions will always have a place on the site. In the future, the company plans to alter fees so that auction sellers don't feel so pinched, though executives have not provided details. The company also intends to showcase additional features that meld auctions and fixed-price listings during and after the annual eBay Live event, to be held this year in Chicago, June 19-21. One possible new feature is a split screen that shows an auction on one side and the Buy It Now price on the other. "Auction-style listings are what keeps the site unique, but fixed price is growing much faster," says eBay spokesman Usher Lieberman.

What happened to auctions? Not only do shoppers want convenience, they're also looking for value. And the proliferation of pricing information online has made it easier for consumers to bargain-hunt and lessened the need to risk overbidding in an auction. Hershenson recalls when a new $40 toaster could fetch $80 on eBay, thanks to a bidding frenzy. Now, a buyer can figure out the retail price with a few mouse clicks. A study earlier this year by the Pew Internet and American Life Project found that 81% of Internet users research products online before buying. "People have a lot of information at their disposal and that sets a reserve price of what they are willing to pay," says John Horrigan, an associate director at Pew. "It makes sense for eBay to set prices to appeal to that."

Auctioneers Up in Arms

But as eBay aligns its focus with the majority of buyers, sellers like Hershenson lose out. When he first heard of the fee hike, at a seller meeting in Washington with eBay management, Hershenson says he stood up and complained. "I said … 'I am exactly the kind of seller who built eBay and brings people to eBay on a daily basis. And it seems to me your changes are hitting me hardest,'" he says, adding that his annual fees would have jumped from $120,000 to nearly $180,000.

Rather than pay the fee hike, Hershenson decided to move his business onto his own Web site, eMoviePoster.com. He auctions 1,000 to 1,500 items on his own site every Tuesday and Thursday. Because Hershenson's merchandise is popular among a specific set of collectors, he feels confident that his customers will follow him and says that most already have. He believes he can attract others with some well-placed ads, purchased with what he saved for not paying the higher fees on eBay.

Not all eBay sellers have the luxury of branching out on their own or moving to a third-party site. When it comes to auctions, eBay is one of the few games in town. Even though growth is slowing in eBay's auction business, the site has nearly 90 million active users. Other auction sites such as Ubid.com (UBHI) have far fewer visitors. Ten-year-old Ubid had 181,000 active bidders in the first quarter, according to its quarterly report.

EBay sellers organized a weeklong sales boycott in February protesting the changes announced in January. "Everybody is mad because they feel that this company got built on them, and when eBay felt that they no longer needed them, they tried to get rid of them," says Maggie Dressler, an eBay seller who has auctioned antique trains and toys on the site since 2001. "It is deplorable."

Many auctioneers may have no choice but to close shop, says Hershenson, adding, "Their latest changes will have the result of ending auctions as we know it on eBay."

Holahan is a writer for BusinessWeek.com in New York.