Shares of Ebay Inc. dropped amidst reports that eBay suffered a 31% slump in its fourth quarter profit; marking the first time that eBay saw a drop. Holiday shoppers are said to be tight in spending over the holidays and for fixed price purchase, they prefer to shop at other online marketplaces; namely Amazon.com. Gross merchandise volume fell by 12%.
While eBay executives are alarmed by this sharp decline, I think that they should have seen this coming. Even before the onset of a global recession, which resulted in a slowdown in ecommerce, eBay had fell off the good graces of many of their long time loyal Sellers. They have forgotten that it is the Sellers who are paying eBay, not the Buyers. eBay suffered a mass exodus and they know it. Now the results show it.
eBay promised that they will turn the marketplace around, still the largest online auction marketplace. They are said to be lowering listing fees for Sellers and make selling standards more stringent to create a more secure auction environment for Buyers. So far, these have yet to convert into profits.
Let’s hope that eBay in 2009 will be a better trading place after suffering this sting.