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eBay's Search for Sellers

By Rob Hof When more than 10,000 eBay sellers descend on the eBay Live! member confab June 24 in New Orleans, it'll be party time. They'll trade collectible company pins, cheer the wedding of eBayers Maggie and Brad, and maybe dance with Chief Executive Meg Whitman. But behind the folksy facade, it's serious business. Veteran sellers will huddle with eBay (EBAY) brass and exchange tips on how to jack up sales. Newbies will attend dozens of classes to learn how to sell eBay-style. It's just one part of eBay's latest push: boosting the number of sellers and the amount of merchandise it peddles on the world's largest online marketplace.

That's a must if eBay is to fulfill Whitman's goal of creating a truly mainstream shopping destination. Sure, it already boasts more than 25 million items at any one time -- from vintage lunch boxes to new DVD players. But its heady growth suggests a need for even more stuff. Last year, more than 40 million active buyers bought $24 billion worth of goods, up 60% from 2002. "We've got buyers to soak all that up and more," says Jeff Jordan, senior vice-president for eBay North America. "Continuing the growth in supply is crucial to our long-term future."

But finding new sellers and keeping existing ones happy has gotten tougher lately. For one thing, new rivals are coming on strong, especially as eBay's own merchants have steadily been offering more and more new merchandise. For more than four years, (AMZN) has been welcoming brand-name merchants to sell on its site. It has also teamed with used-book, music, and DVD sellers. And search engine Google can send customers directly to a merchant's Web site via cost-effective targeted ads.

MOM-AND-POP IMPLOSION. The rivals are taking a toll: The online print store, for one, once listed 8,000 posters a week on eBay -- but not anymore. Now, founder and Chief Strategy Officer Michael Marston says paying Google several million dollars a year for leads, in addition to selling on Amazon, results in better sales than on eBay.

Even more worrisome, some top merchants among eBay's 430,000 mom-and-pop sellers -- which still account for more than 95% of that $24 billion in gross sales -- are hitting the wall. Scot Wingo, CEO of ChannelAdvisor, which sells e-commerce-management services to large eBay sellers, sees up to 20 of them implode every month as they fail to adapt to changing technology or new competition or simply can't keep up with growth. Laments Wingo: "You see these nice couples from Florida at eBay Live, and you know they're going to be out of business by next year."

None of this has yet hurt eBay. First-quarter profits jumped 92%, to $200 million. Net sales, comprise its fees and a cut of the final selling price of items, rose 59%, to $756.2 million. That's largely because enough new sellers, irresistibly drawn by the huge population of buyers, have replaced the departed. Nonetheless, eBay is taking action in hopes of solving seller problems before they hit the bottom line.

SCHOOL DAYS. Tops on the to-do list is simply making the site easier to use. Nearly every week, eBay adds fresh features, from software that facilitates listing items in bulk to faster links to outside shipping services. "They've accelerated the rate of change," says Rodrigo Sales, CEO of the e-commerce services company Vendio Services. Still, the site remains daunting for inexperienced sellers, most of whom are eBay buyers who got the bug. Admits eBay's Jordan: "It's still too hard to sell on eBay."

That's why the company is also increasing efforts to train its sellers in the eBay way. Besides eBay Live, it's expanding its eBay University program, which runs a one-day series of classes in 30 cities around the country to coach both beginners and veterans in everything from listing items to advanced photography techniques. Within a month of taking the class, eBay has found, sellers double their selling activity on the site.

Ultimately, eBay may get the most help from its members' uncanny ability to keep the site's economy in the kind of balance that would prompt tears of joy from free-market economist Adam Smith. Consider the latest rage in eBayland: real-world drop-off sites. These storefronts, opened by entrepreneurs without eBay's help, take items on consignment, doing all the listing and shipping for a fee.

At San Carlos (Calif.)-based AuctionDrop, 92% of customers are new to eBay. "We're building a mass-market on-ramp to eBay," says CEO Randy Adams, who'll announce a deal on June 22 to let people leave items at any of 3,400 United Parcel Service franchise stores nationwide. That's the kind of invisible helping hand eBay can use if it's to turn a nation of consumers into merchants. Hof is BusinessWeek's Silicon Valley bureau chief

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