Watch Out eBay, Amazon: The Year of the Third Party Seller Is Here

With fears of recession in the wind and announcements of job cuts coming down the pike, I would look for growth in small business in 2008. As the corporate world becomes less secure, many will strike out on their own in the hopes of controlling their own destiny. Starting off small while still employed and learning the ropes, makes sense in this environment. There are currently over 19 million sole proprietors and small businesses in the United States and millions more worldwide. This number will increase in a recession and soon, very soon, the marketplaces will be competing for their business. eBay (EBAY) has already signalled that it will, by announcing fee reductions. Play.com charges lower fees than Amazon.com (AMZN), Etsy.com charges lower fess than eBay. Those marketplaces that can achieve critical mass in traffic will be reaching out to 3P sellers more aggressively in the years ahead. Power to the 3People! (Sorry, that sounded better in my head)

Amazon is aggressively courting SMB's (Small and Medium Sized Business) to sell on its platform, expecting to add nearly 40K high value accounts in 2008 and expanding globally. eBay, after years of trying to manipulate seller behavior with their 3 levers (I call them hammers) Price, Policy, and Product, has changed its tune to offering carrots instead. Sellers, on the eBay platform, whether they realize it or not, are getting back some of the power they gave up over the years. Organizations like PeSA and ECMTA should increase their membership in 2008 as sellers/merchants try to unite behind a common goal; selling their product.

One problem, in this scenario, is that both Amazon and eBay are courting high value SMB's because they drive the largest share of the business. The coming changes to eBay's fee structure will change the dynamics of their business as larger sellers get the capability to scale on the eBay platform. Smaller sellers will still have opportunities on eBay, but it will probably not be the quaint little "flea market" it has been in the past.

So where does this put the small online merchant or the part-time, extra cash, businesses that swell the ranks of eBay sellers? Increasingly, the moves made by Amazon and eBay will marginalize these sellers. Even though eBay will continue to be an auction business, the focus is shifting, and auctions will be less of a focus in the years ahead. There is good news though, even though this may be a short-term negative for small sellers. This change in focus at eBay will open the doors to other marketplaces like Etsy who can fill the void. Also, entrepreneurs who can harness the power of the small business will reap the benefits going forward.

Etsy, is a fantastic business for hand-crafted products and could easily expand to reach out to those small and part-time eBay sellers that will be affected by the changes on eBay, and who cannot sell on Amazon because their category is not offered. Etsy is growing and will become a force in the next couple of years. Others will follow, though they will be mostly fixed price marketplaces. I think the era of the auction is over. It ended when Meg Whitman made the announcement that she would retire.

3P sellers/merchants will soon be in the driver's seat, and, if they get organized, look out because they will take over the world. (Okay that was a little much, but you get my point).

Comments

[ralphg:]

>Amazon is aggressively courting SMB's (Small and Medium Sized Business...

No, it's not. My publishing company has a line of 40+ ebooks on computer-aided design. Amazon repeatedly denies my wish to be able to sell the ebooks on their site. And I've been trying for more than a year.

Their reason?

They only take publishers with 1000 or more ebook titles.

2008 Jan 25 03:55 PM