eBay's Home-Cooked Rivals

A month after some of eBay's(EBAY Quote - Cramer on EBAY - Stock Picks) largest customers created an uproar over the company's decision to raise its listing and other fees, the dust is settling and the fallout is a little clearer.

The upshot: Talk of a mass exodus is proving hollow, as is a threatened boycott among sellers. eBay has made small steps at alleviating some of the pain from higher fees. Competitors will see a sliver of listings move from eBay to their sites. But angry sellers have hardly delivered a body blow to the e-commerce giant.

That's the good news. The bad news is that the episode exposes, or even enhances, the long-term threat that eBay faces from other sites -- particularly sites set up by eBay's own customers to compete with it. In some cases, eBay is proving an incubator for small businesses to set up shop online. Mom-and-pop shops may be getting squashed by the likes of Wal-Mart(WMT Quote - Cramer on WMT - Stock Picks) on Main Street, but they are being nurtured by eBay on the Net.

It's unlikely that many of eBay's "PowerSellers" -- members of a voluntary program eBay offers to its high-volume customers -- will leave the site completely or substantially curtail listings. But they are moving from a world in which they sold exclusively through eBay to one in which they have multiple channels -- Amazon.com's(AMZN Quote - Cramer on AMZN - Stock Picks) zShops, Overstock.com(OSTK Quote - Cramer on OSTK - Stock Picks) and their own Web sites for loyal shoppers.

American Technology Research, which performs no underwriting for companies, held a conference call with several eBay PowerSellers on Monday to gauge their feelings. "There appears to be no PowerSeller interest in leaving eBay, but there is interest in allocating incremental investment dollars to other channels, specifically sellers' own Websites," Mark Mahaney, an Amtech analyst, wrote in a report after the call.

Should eBay be worried? The company says the trend is nothing new. Hani Durzy, an eBay spokesman, says having its customers selling simultaneously on eBay and their own sites "is something that has gone on forever. We've always encouraged sellers on eBay to experiment. We're not seeing a pattern of seller churn or departure from our site."

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