Do All Roads Lead to EBay?

With all the attention that EBay (Nasdaq: EBAY) has devoted to building fixed-price sales on its site, one might jump to the conclusion that the Internet auction giant has dramatically changed its mission.

The fact is, EBay remains first and foremost an auctioneer, according to analysts and company executives. However, the fixed-price push is helping EBay solidify its position as an open, online marketplace -- while at the same time positioning the company for a challenge to Amazon.com (Nasdaq: AMZN) in the third-party e-tail market.

"Auctions will always be the sort of centerpin of whatever EBay does," Forrester analyst Carrie Johnson told the E-Commerce Times, but "fixed-price goods are rising in importance" and may help power the auction business even further.

Johnson predicted that mainstream consumers who are reluctant to dive into the online auction market might build a "level of trust" for EBay through their fixed-price sales .

EBay's fixed-price operations now account for about 16 percent of sales on EBay, company spokesperson Kevin Pursglove told the E-Commerce Times.

Those operations include subsidiary Half.com, the "Buy It Now" auction feature that lets buyers choose to pay a set price at the outset instead of starting a bidding war, and the new "storefront" section consisting of third-party vendors setting up shop on the EBay site.

Fixed-Price Push

"We see growing use (of the fixed-price format) by sellers and buyers," Pursglove said. "EBay Stores is perhaps the latest step in that evolution."

Buy It Now is now featured in nearly one-third of all EBay auctions, according to Pursglove. In addition, EBay has accelerated plans to integrate Half.com into its overall operations, though the company is still deciding how the merged product will look.

"The idea will be to have one brand," Pursglove said. "Exactly how we're going to integrate that brand and how we'll integrate the listings into EBay has yet to be determined."

Showing Some Half-Life

Morningstar.com analyst David Kathman told the E-Commerce Times that "Half.com is continuing to grow pretty nicely."

Gross merchandise sales at the division were up 44 percent from the second quarter to the third, and listings were up 15 percent, Kathman said.

Though the offerings on Half.com are "not quite as diverse a bunch of stuff as on EBay proper," Kathman said, "they've added a lot of categories."

Challenging Amazon

As a result, EBay is moving into position to go head-to-head with Amazon in serving brick-and-mortar retailers that want to get more online business.

"I think there's room for more than one player in these areas where Amazon and EBay are butting heads," Kathman said.

Kathman believes that storefront-type arrangements hold big potential for both EBay and Amazon, which runs a similar operation called zShops.

"Obviously a corporation has more stuff to sell than somebody selling comic books or Beanie Babies out of his garage," Kathman said.

Untapped Businesses

Providing a platform for big companies to sell surplus merchandise, or for smaller, less Web-savvy ones to get into e-commerce, can be "pretty lucrative," according to Kathman.

"These are the sort of peripheral things that could become much bigger, and they're both trying today to lay the groundwork for much bigger doings in the future," Kathman said.

In some ways, said Kathman, EBay may have the upper hand over Amazon, which like most e-tailers is still struggling to turn a profit. EBay is "in a more stable position, business-wise," according to Kathman.

"They're already profitable," Kathman said. "They've got plenty of money."

EBay's Evolution

For its part, EBay believes it will build on its past successes, even during an overall economic downturn.

On October 18th, EBay reported third-quarter net income of $18.8 million on revenue of $194.4 million. Company officials said on a conference call that day that EBay expects to do even better in the current quarter, as businesses seek to get rid of unwanted merchandise and consumers look for bargains.

Pursglove acknowledged that while EBay started out as an auction site dealing mainly in collectibles like Beanie Babies, it has grown to the point where collectibles make up less than half of all merchandise sold.

"As more and more people come to the site with different expectations, they've really engineered it so it works best for their particular circumstances," he said. "EBay is essentially a liquid marketplace."