In response to declining performance from eBay, Lance Wiggs has written a short analysis of what eBay is doing wrong compared to Trade Me, which dominates the New Zealand market.  Trade Me is something of a latter-day national icon in NZ, having been a textbook dot.com startup which made its young founder famous and very wealthy, has survived the transition to big corporate ownership with its reputation and customer loyalty intact, and continues to grow its usage, revenue and profitability.

Today eBay Australia has 1,113,647 listings located in Australia, eBay.com has 25.2m listings located in the USA while Trade Me has 1,255,082 listings in NZ. (That’s right, there are more actual listings on Trade Me than on eBay Australia.)

That’s 55 listings per 1000 Australians, 84 per 1000 US citizens and 305 listings per 1000 New Zealanders. That’s astonishing - 5.6 times difference between Nz and Australia, and 3.6 times between NZ and USA.

Now we do need to adjust for the critical difference - eBay charges listing fees while Trade Me does not. We used to say (and observe) that free listings sites attract 2 time the listings of non-free ones. That would still leave Trade Me at 152 listings per person - 2.8 times more than eBay Australia and 1.7 times more than eBay.com USA.

While comparisons between a small market and a large one are problematic (differences in levels of competition, granularity, etc), Lance examines several stark contrasts between eBay and Trade Me, eg. usability, use of advertising (Trade Me spends nothing while eBay spends a third of its margin), and so on.  But these differences, while important, are not the big issue.  To me, the most important difference Lance identifies is that eBay, which originally started as a personal auction service, has increasingly shifted its focus to serving the large businesses which use it as an online shop; in contrast, Trade Me has remained a web service focused on the individual trader, even though it has  some larger players using it.  eBay today is little different from Amazon and Yahoo, who do a better job as shops, and vulnerable to big traders simply doing their own thing at much less cost. Trade Me’s buyers are sellers too, and are easily attracted to Trade Me’s additional services which remain true to the Trade Me motif. Trade Me’s shoppers go there not just because they want to buy something, but also because they can and do easily sell their dining table, garden equipment, doll collection, car or house.

Many business start off serving one market but evolve to serving another over time.  Sometimes that’s a good thing.  But there’s a risk that pandering to your biggest customers over the short term means you lose what made you successful. It looks like eBay has fallen into that trap while Trade Me has avoided it.