Auction sites and the exchange traded funds (ETFs) that hold them are seeing hard times and a not so holly-jolly Christmas.
This holiday season has seen a decline of shoppers on auction sites like eBay (EBAY) and a trend towards the more speedy and convenient fixed-price sites, like Amazon (AMZN). In fact, weekly traffic on eBay fell 16% between Nov. 3 and Dec. 14 and increased by 6% on Amazon as compared to a year ago, states Christopher Lawton of The Wall Street Journal.
One positive bit of news is that online retail sales held up better than most this holiday season, report Ben Worthen and Jessica E. Vascellaro for The Wall Street Journal. Online spending fell 2% from Nov. 1 through Christmas Eve, compared to a drop of 5.5% to 8% for the retail sector overall.
eBay has seen a few changes, a restructuring of its emphasis away from an auction house toward a fixed-price site and the emergence of a new CEO who has made it cheaper to list an item and boosted the fee charged when an item sells.
These changes have had little financial impact, but have really upset many loyal eBay sellers. The sellers complain that the new fee structure has eaten away from profits and has made it difficult to resolve complaints and issues, which decreases a seller’s rating, something vital to the success of an eBay seller. To add more fuel to the fire, the technology changes have made it confusing to shop, deterring potential shoppers.
Its not all gloom at eBay, though. John Donahue, the new CEO, has attracted many big-time retailers such as Buy.com and Microsoft (MSFT) by offering them bulk discounts and giving them extra incentives, hoping to boost the number of visitors, potential market share and revenue for the company.
Ultimately, it is the customer’s appetite for bartering that will determine whether or not he will choose to search and buy on an auction site.
An ETF that could be influenced by eBay is First Trust DJ Internet Index Fund (FDN): down 48.3% year-to-date; eBay is 8.9% of the ETF.