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Every retailer expect and need surging sales in Q4 peaking with Xmas sales and it is no different for the E-tailers, traditionally led by eBay and Amazon.com.

Lately, however, whilst traffic and revenue figures have continued to grow for fixed-price online E-tailer Amazon.com, the picture is quite different for auction site eBay who is seeing a drop in year-on-year traffic and sales figures. this year. And that worries observers of the industry who are now asking themselves whether eBay has got what it takes to turn around this negative trend and win back its lost market share and end-users.

This post looks into the problems at the heart of eBay and what experts and analysts have to say about this falling giant who only a few years back was synonymous with E-tailing.

Christopher Lawton of Wall Street Journal points to the dropping performance by eBay as being primarily caused by customers who now seem to favour the fixed-priced sites such as Amazon.com and where eBay has less of an edge and also because of continued problems with unscrupulous sellers which make customers turn to other sites with better control over the purchase process:

Weekly traffic to the auction site fell 16% between Nov. 3 and Dec. 14 from a year ago, according to research firm comScore Inc. In contrast, Amazon.com had 6% more unique visitors during the same period.

The weakness is showing up in the sales of eBay sellers such as Gary Meyer. Mr. Meyer owns Gem Enterprises Inc. in Merchantville, N.J., which lists more than $300,000 in tech equipment such as printers on eBay. So far this holiday season, Mr. Meyer’s sales on eBay are down 30% to 40% from a year ago, he says. “We’ve geared up our Web site more and started listing on Amazon.com and other venues,” Mr. Meyer says.

Mr Lawton continues by hinting that after the change a year ago of their CEO from Meg Whitman to Mr John Donahoe, the company’s strategy and course are now more confusing to users and analysts alike as new initiatives trying to win back lost clients seem to have led to mixed results and so far not encouraging financial results:

EBay performance this quarter could be a referendum on the changes Mr. Donahoe has made this year. Since taking over for former CEO Meg Whitman in March, Mr. Donahoe has sought to rev up growth and reclaim buyers who had stopped visiting the Web site.

His most significant move has been to make eBay less of an auction house and more like Amazon, Walmart.com and Sears.com, selling fixed-priced goods, which consumers now prefer for speed and convenience. Among other changes, Mr. Donahoe has cut the fee to list fixed-price items on eBay and boosted the fee charged when an item sells, a model that helps fixed-price sellers better set profits.

Yet the changes have so far had little financial impact — and have angered many loyalists. Transaction revenue per listing between October and the end of November plunged 28% from a year ago to $1.44, according to Majestic Research. Wall Street analysts now estimate the San Jose, Calif., company will post its first year-over-year revenue decline when it reports fourth quarter earnings next month. Seattle-based Amazon has forecast an at least 6% increase in fourth quarter revenue over last year.

“We haven’t observed…any material positive changes on the buyers’ side of the equation,” at eBay, says John Aiken, managing director with Majestic Research.

The fact that the purchase process is faster and less complicated on fixed-priced sites such as Amazon.com should not in some experts’ views make eBay abandon their core strategy which is all about offering consumers the chance to sell and buy at flexible prices. Lately, however, eBay has under its new leadership of John Donahoe been encouraging sellers to offer items at fixed prices, making it appear more like a traditional online retailer.

Stephen Foley of UK-based The Independent quotes Laura Martin, a media analyst at Soleil Securities for putting the blame for this wavering strategy at the top of the company:

Consumer spending numbers are going down for all retailers, but eBay has particular problems because it is becoming increasingly difficult for customers to find the deals that they want on there, amidst all the clutter of fixed-price items. I don’t understand why eBay is making itself more like their competitors instead of less.”

Michael Fowlkes of Bloggingstocks  reminds us that eBay is still the King of e-commerce but he does acknowledge that there are problems facing the giant especially as Amazon’s traffic and revenue numbers continue to grow despite financial crises:

While it is true that eBay has been seeing a large number of users defecting to other popular e-commerce sites such as Amazon, Walmart.com and Sears.com, it is also important to note that eBay is still the king when it comes to e-commerce, and the site is still sitting on three times the volume of its competition. Regardless, the writing is on the wall, and the site is doing all it can to move quickly into the fixed-price marketplace that has been gaining steam over the past couple of years.

Mr Fowlkes goes on to point out that eBay could find themselves in the classic stuck-in-the-middle strategy if they are not quick to clearly define what their business and service is all about to end-users and investors alike:

It is a tough situation for eBay as it tries to aggressively redefine itself. For a company that has built itself on the back on the auction business, a too rapid and aggressive move into the fixed-price business is definitely going to ruffle a few feathers. The company has to try its best to appease its current sellers while at the same time moving as strongly as it can to keep and regain buyers, all the while trying to entice new shoppers into the site.

Some sellers have voiced disapproval, stating that the company is moving too quickly into the fixed-price business, and that their loyal customers are still more interested in finding the lowest price merchandise available, which is often achieved through the auction side of the business.

Though it remains a fact that eBay has many loyal users and bidders, there seems to be a trend among consumers lately to prefer the no-nonsense fixed-price sites to the auction based ones with speed, convenience and assurance to get the item one wants being the key reasons for consumers preferring an Amazon type online offering to the auction based ones which eBay invented and still rules.

So when Amazon is about to officially record its best ever Xmas sales, eBay is about to record declining sales for the first time in its operating history and one has to ask the question if eBay’s strategy is the right one moving forward?

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