Doomed by eBay

I quit my job to become an online auctioneer, but the success of millions turned out to be a disaster.

Published October 27, 2000 7:28PM (EDT)

A little less than three years ago, I quit my day job to become a full-time eBay seller, making my living selling collectibles through online auctions. At first my luck astonished me. I was drunk with success, earning three times what I had been paid by more conventional employment.

Lately, however, my eBay business, like the businesses of so many other eBay sellers, who depend either in part or whole on eBay sales to pay their mortgage and put food in front of their children, has stumbled drastically. It isn't because I don't know my game. I am closing in on 850 positive feedback points from happy bidders.

It's because the game has changed. Five years ago when eBay began its shuttle blast of an ascent, it was a fantastic opportunity for self-employment wannabes, a wide-open market with only modest competition. Today, longtime dealers like me, who once fell prey to the siren song of easy money, are finding themselves in trouble. EBay's own success is turning out to be our downfall.

In early 1998, when I registered with the service, eBay had around 800,000 users. At any given moment the online auction house was adding a little over 60,000 auctions per day. Of these, eBay touted that 75 percent ended successfully, meaning that they received winning bids. How much? How much would I get?

Today the number of items listed daily has jumped to more than 700,000. If you add in eBay's newly acquired company,, this figure soars to over 1.5 million items listed daily. Gone from eBay's press releases is the number of its auctions that end successfully. EBay no longer congratulates its users for listing with them, or tells them that most of its items sell.

EBay is a monster. It's a closed economy in hyperdrive, astonishing in its power to change, roll over or flatten anything or anyone in its path. Take a quick trip to eBay's discussion boards and you will find desperate sellers running scared like me. We are being forced out by competition, both from new hordes of sellers eager to cash in and from the scores of higher priced brand-name auctioneers that eBay is cutting deals with. Our profit margins have declined to the point that one night of eBay technical problems, an event that is becoming more and more common, can send us to the edge of bankruptcy.

It all started out so innocently. I was a willing, eager fool for eBay. Three years ago, I needed some extra cash and I had a lot of extra stuff sitting around in closets that I hadn't even looked at in years. What's the use of taking boxes of stuff I never use from house to house and apartment to apartment each time I move, I asked myself? Wouldn't it be spiritually wiser to rid myself of these material trappings, these halfhearted collections and unread books, and in the process pay off some bills?

That's just what I did. I couldn't believe it. The money people paid on eBay for my junk! I didn't sell bad junk. Nothing broken or fake or cheesy. Yet to everyone but a collector, it would have been considered junk, the stuff most people pass over at a yard sale. For a week's work of taking photos, writing snappy descriptions and waiting on horrendous uploads of listings and graphics, I made over $800.

Now to a day trader, $800 is complete and utter chump change; $800 won't buy you a decent suit. To a woman in her mid-30s with a going-nowhere graphics job that pays $235 a week after taxes, the difference was staggering.

Did I quit the day job? Don't be stupid. That would have been completely irresponsible. I waited until my second week's worth of stuff brought me another $725. Then I told my bosses they could take their brain-numbing job designing 25 coupons a night for carpet cleaners and chicken restaurants called Pluck-U, and shove it where the Merry Maids don't shine.

All went swimmingly until I began to run out of stuff. It took me approximately a month to cleanse my soul of McCoy pottery, Eisenberg costume jewelry and weird old books about the beginnings of Los Angeles. I then had a dilemma. Where could I get more junk to put on eBay?

No problem, I soon discovered. Back then, I was living in the Tampa Bay area. It so happened that people with lots of cool collectibles who had retired to Florida were expiring on a regular basis. All I had to do was open the St. Petersburg Times and there they would be, as many as 10 estate sales listed per weekend.

So I joined the rest of the herd who woke themselves up an hour before dawn from Thursday through Sunday, and not even daring to take time for breakfast or a cup of caffeine, raced from one dead person's living room to another, pawing over items the surviving relatives either didn't understand or didn't appreciate. Competition was fierce, and frequently ugly.

Dealers and pickers, experienced buyers who scavenge sales in order to sell to other dealers who are too lazy, busy or dignified to do it themselves, would frequently become involved in tussles that verged on assault, all so they could be first through the front door. It was essential to be among the first six. Seventh or eighth in and you might as well forget it. Knowledgeable buyers can pick a three-bedroom house clean of anything worthwhile in under a minute. In order for me to score at all, I frequently had to show up an hour before a sale was due to start.

Somewhere along the way, two things happened. First, I noticed that I was really good at knowing what would sell on eBay.

My mother, who lives on Social Security, and can no longer find a job that doesn't involve greeting people at Wal-Mart, or asking if someone wants mild, hot or fire sauce with their chalupa, soon became my eBay business partner. She is an idiot savant at cleaning "hopeless" antique linens. Except for the idiot part. She's just pure savant. Nor can anyone begin to touch her jeans hem with a steam iron.

However, she would often try to stop me from buying things I saw.

"Not those!" she'd say, with a grimace, as I picked up Rodney Kent hammered aluminum trays from the 1950s, or Boonton Melmac mixing bowls from the 1960s for a buck apiece. "Who the hell is going to want those?"

"Trust me, Mom," I'd say. "They're going to want it about two months from now. Can't you see the style in it? It's next up. These people knew design and pretty soon you're going to see it featured in Martha Stewart."

She never understood, but always admired my forecasting when a couple of months later whatever I'd chosen would rake in up to 5,000 percent profit, feature articles in Martha notwithstanding.

The second thing I noticed was that the pickers and traditional antique dealers I had done the Filene's Basement tango with during the previous few months began to disappear.

"Why?" those of us still in line for yard sales would wonder aloud to each other. "Where did they go?"

In their place soon rose a new breed, and we had an answer to our question: eBay sellers. Suddenly they were everywhere, people who knew my secret to success. Rapidly eBay was pushing the traditional, small-time brick and mortar dealers out of business. I knew it was true when I happened to catch someone waiting in line for a juicy sale at the First Methodist Church in Clearwater, singing "Video Killed the Radio Star." Except their lyrics went, "EBay killed the collectibles store."

Perhaps at that point I should have rethought my position, seen the writing on the wall, moved on to some other form of employment. Up till then I could confidently walk into an estate sale and know I would be the only one there interested in buying ladies' 50-year-old nylon, seamed stockings. (Drag queens and fetishists were paying beaucoup for them in the vintage clothing category.) Now I had to look even further and harder for that untapped online auction market.

Instead of quitting, instead of being sensible and realizing that I had pinned my entire well-being, and my mother's, too, on the service provided by a single Internet company, which at any moment could crash and burn, the victim of a spent fad, I whipped myself into overdrive. I went to so many sales, spent so many hours at the computer, listing items, researching winning bids in a multitude of auction categories, taping Collectible Treasures until if I heard that chirpy theme song one more time I swore I was going to shoot the Prime Star cable box, that my social life completely died out. I began losing my old friends through attrition, yet didn't take time out to make new ones. How could I? I was now too busy, too harried and suddenly, unexpectedly, too broke to go anywhere or do anything but list, list, list.

What had happened to my world, my great new life, my shiny, aggressively bright dream of self-employment?

Success. That's what. Not mine, eBay's.

According to just released third-quarter statistics, today eBay has nearly 19 million registered users, "making us larger than New York City," the company brags on its announcement board. That's up from 7.7 million in 1999.

The problem is, if eBay's 146 percent increase in registered members included mostly bidders, then eBay sellers would be in good shape. But most new members are probably sellers as well.

"There are very few of us who only buy on eBay, from what I can tell," says Ken Houghton, a consultant for a big-five accounting firm, who was recently able to bid on three copies of the same "scarce" book in auctions all ending the same day.

What does this all mean? For starters, my sense of what might be sellable is no longer a dependable business tool. It served me well, but it simply can't compete with category after category of once popular and scarce collectibles now saturated with items. One Victorian trade card I bid on and won for $40 a year and a half ago, won't bring me an opening bid of $2.99 today. A box of vintage postcards and ephemera that would have netted me close to $2,000 a year ago is failing miserably right now. How can it do otherwise? The category Collectibles>Paper>Postcards>Town Views, where I would list most of them, has 41,697 auctions running in it as I type. It would take weeks for a potential bidder to scroll through the 834 pages of listings, let alone click and download each of the 50 auctions to a page.

It's outright depressing. EBay is like it was in the beginning, only in full-throttle reverse. Categories that made me a living just 10 short months ago have become clogged with product. I've long given up on costume jewelry, McCoy and Roseville pottery, tintypes and vintage beads. Our linens used to score big time because of my mother's talents, but now we're practically giving the stuff away.

I called eBay to get an official response to my situation. Was it really true? Was the growth of eBay resulting in a monster that was eating its young? But for the most part my worries were dismissed.

"We believe the potential for growth on eBay is very, very strong," said Kevin Pursglove, a senior director for eBay. "As the trading platform has expanded, as we are attracting more users, it is true that many categories now have more sellers today than they did, say, a year ago, or two years ago. And that is just a natural function of a market place. Of a dynamic market place in which a small group of sellers have demonstrated a very successful ability to sell merchandise, which then attracts other sellers, which by definition will enlarge the market place. In many cases, it brings more bidders, as well."

But it's not just the profusion of small-time sellers like me who are flooding the market. Approach the problem of success for the mom and pop eBay seller from a different angle, and the conclusions are still foggy and undrawable. Last year, the value of all goods sold on eBay's site leapt by 83 percent to $1.4 billion. During the third quarter, the company hosted 68.5 million auctions. This is up 89 percent from the 36.2 million auctions run in the third quarter of 1999.

On the surface this suggests that winning bids almost kept pace with the increase in items listed. But much of the value of those winning bids is actually concentrated in big-ticket items sold by professionals. During the past year eBay has added its Great Collections auctions, and significantly expanded eBay Motors. For the price of a 2001 Ram Dodge pickup and a couple of A. Blanchard Paris street scenes, you could win almost every one of the 9,000 romance fiction auctions running at any time.

Today, eBay has more than 200 online partners, including a recently launched, co-branded Disney site, which sells rare and authenticated Disney memorabilia and artifacts. Some would argue this will bring more Disney fans into the orbit of eBay's private sellers of the same collectibles, but the danger is there for loyal eBay Disney hounds to be sucked away by this bold new launch. Why buy an animation cel from someone you don't know, when Disney is there to authenticate theirs for you?

"In the Coin category," writes CEO Meg Whitman in her quarterly letter to eBay users, "we developed relationships with Heritage Coins, Certified Collectors Group and Collectors Universe. Not only are these companies known and respected in the Coin industry, they also have access to higher priced and hard-to-find items."

Terrific, I can imagine the poor dealers in the coin category thinking, just what I need. Some hotshot company to make my goods look like vending machine slugs.

"The great majority of business on eBay is still conducted by the smaller users," declared Pursglove, "and not necessarily conducted by the larger companies that have gotten a little bit more attention over the past year or so."

Pursglove did concede that the average "Gross Merchandise Sales" (GMS) per user is declining, but he denied vehemently that this was a case of fewer auctions making more money.

"No, no, no. That's not what we're saying at all," says Pursglove. "What we're saying is that the number of items there is expanding, and as well, the type of items that we now list on eBay are much different than they were a year ago. A year ago, or a year and a half ago, eBay was primarily known as a collectibles trading platform, but now because you do have the small to medium size businesses that sell on eBay, as well as those individuals, you will see an alteration of the average GMS numbers, and the average GMS numbers per user."

As if added competition is not a serious enough threat to private sellers, the current, monthlong rash of eBay outages and site instability has many sellers livid, so angry the company's discussion boards become a virtual firestorm of hate and overwrought emotion each night when bidders can't get in to bid on their auctions and all important search functions go down.

"Fuk you, Fuk you, eBay," one user messages the board in giant, bolderized type, intentionally misspelling the expletive, perhaps hoping that eBay won't suspend him or her, or delete the message.

So what is eBay doing for us? Pursglove ticked off a list of new services that he said demonstrated eBay's commitment to average users.

"There are all sorts of services that we've developed for our users over the years to make it much easier for them to sell their items," said Pursglove. "We have a shipping arrangement through iShip, photo hosting services are now available through iPix. We've created a Billpoint credit card service so that when you list your item on eBay, you can literally pay for it within minutes of it being closed down. So you don't have to wait three or four days to have a check sent to you, another three or four days to have that check clear, and another three or four days to have the item ship. So there are a ton of those services that we continue to offer to our sellers and buyers that are helping the average, everyday user on eBay sell their own merchandise, whether they are a person that might sell five or six items a month, or whether they're selling a hundred or five hundred items a month."

For some of us, however, instead of photo hosting services, we'd just like the system to work. The Auction Guild, the Lone Gunman of the online auction world, determinedly monitors and documents it each time eBay bogs, crashes or throws repeated error messages, sometimes even catching the company in lies about its downtime. "The worst problems have been from the third to the 25th of October," the guild's Rosalinda Baldwin tells me. Sure enough, a few keystrokes and I'm looking at incident reports of major outages and problems on Oct. 10, 11, 12, 15, 17, 19, 20 and 22, many of which were not fully or, according to the guild, honestly, reported by eBay on its announcements page.

Pursglove disputed some of the Auction Guild's reports, noting that some of the outside monitoring services may inaccurately record "intermittent problems" as major outages. He stated that there hadn't been an outage longer than two hours in more than a year.

But on Tuesday, after eBay admitted that it was having difficulties, its shares fell $5.50 to $54.06. They had already been dropping in the wake of the Oct. 10-12 outages. The shares were temporarily juiced up by the company's third-quarter earnings release on Oct. 19, but have already relinquished what ground they gained. Given that eBay's normal routine is to release earnings reports on the 25th of the month after the quarter ends, this glowing news, presented early, sounds suspiciously like an attempt to divert attention from known problems.

Like a lot of sellers, eBay's stock is not of prime importance to me. What hurts me are the 33 out of 50 of my auctions that closed without a single bid last week. Of the 17 items that sold, only three rose above their paltry opening prices. I have less than $100 gross income to show for a 60-hour workweek.

What all of these problems boil down to is more uncertainty and more competition for individual, full-time eBay sellers, the dogged loyalists who helped build eBay up from an auction board for Pez dispensers.

Thursday, there was a court hearing. My mother and I are being evicted because we can't pay the rent. I know this sounds melodramatic, but unfortunately, it's true. Earlier this week, eBay cut out when more than half the auctions we had running closed. Last-minute bidders, the most important kind, couldn't get in to place their bids. We lost money. A lot more than we made. It was a wake-up call.

I can't go on like this. I will not go on like this. I won't let my mother, her two dogs and my three cats, Raven, Sparrow and Magpie, who are my family, and depend on me to make certain their world is whole and sane, continue like this. It was a beautiful dream, but a stupendously arrogant one on my part. I fell under the giddy, deep drink of individual Internet commerce, and it has to stop.

It's a sure bet that eBay will continue to grow, continue to be profitable, to justify its rating as the Motley Fool's "favorite long-term stock of any valued under $20 billion." I can't tell you how relieved I am, however, what an enormous weight off my shoulders it is to finally admit I am done with it. This is one fool the online auction world will have to do without.

By Claudia O'Keefe

Related Topics ------------------------------------------