Survey Finds Contentment at eBay's Core

The auction giant's sellers are more worried about fraud than fees.
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A research report from Piper Jaffray based on a survey by the firm of 50 of

eBay's

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biggest sellers at last weekend's "eBay Live" jamboree shows most of the online marketplace's core customers are in fact content with the service, if concerned about a fast-evolving e-commerce market.

In contrast to a number of recent reports that eBay's customers are ready to fly the coop and strike out on their own, the Piper survey found eBay sellers having at best mixed luck in selling through non-eBay venues. And many sellers were now less concerned about eBay's fees than online fraud and competition from other sellers on the Net.

"Overall, the vast majority of PowerSellers were still content with eBay, with many utilizing eBay as their primary source of income," said the report, authored by Piper's Internet analyst Safa Rashtchy. Piper, which rates eBay market perform, has no underwriting relationship with the e-tailer.

PowerSellers, or sellers on eBay's marketplace with both high product turnover and high ratings from buyers, found illiquid markets on rival channels such as

Yahoo!

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Auctions and

Overstock.com

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. "While many of the sellers we talked to suggested they would like to sell on a secondary site, most have not found alternative outlets to be worth their time, and only a few have sold successfully through their own sites," Rashtchy said.

Last Thursday, eBay announced two programs aimed at making business easier for its PowerSellers: a ProStores feature that allows sellers to create an online storefront independent of, but linking to, the eBay marketplace; and Reseller Marketplace, which allows sellers to buy refurbished, liquidated and excess inventory directly from manufacturers and distributors. Both programs seemed to be greeted positively by eBay's customers.

But eBay still faces several challenges in creating a friendly and profitable channel for its customers online, especially as sellers move away from used or unique items and toward goods available elsewhere on the Internet. One is that eBay sellers are becoming less visible as

Google's

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and Yahoo!'s targeted ads in search engines and on content sites connect buyers with other retail channels.

Another lingering problem is online fraud, and the strong aversion to it among once-burned buyers. Buyers are concerned that they may be getting branded goods that are simply fakes or knock-offs. As a result, eBay sellers find they are often selling goods like sunglasses at a significant discount to a known retail outlet like Overstock.

"An FBI representative at the conference estimated that fraud rates on eBay were around 1% of all transactions, much higher than the approximate 1/100 of 1% that eBay reports -- this divergence is explained by the fact that many eBay users don't report fraud," Rashtchy said. "Although this number is still reasonably low, it is still vastly higher than most consumers will bear without applying a substantial discount."

While Google has distanced itself from reports that it's working on a rival to eBay's PayPal online-payment system, the more immediate threat to eBay from Google may be in its Froogle shopping-search engine, the survey suggests.

"Many of the sellers we talked with also suggested they would be very interested in a Google listings service that would compete with eBay," the report said. "With Google's recent hiring of Louis Monier, one of eBay's chief engineers, and speculation that Monier will head up Froogle, sellers may in fact get a serious competitor to eBay."