trademe vs. eBay web 2.0 growth strategies

How do you see trademe.co.nz in the context of the New Zealand e-commerce industry in a web 2.0 environment of the future? I think that this is a question that loyal New Zealand online business people need to be asking themselves. I have always promoted  (although this is the first time in writing) my belief that as a community, New Zealander's have bought into success of trademe, without fully appreciating the potential that the 'Internet' holds for e-tailers regardless of our local auction site. It's just starting to feel like New Zealand is swapping one direct marketing monopoly (yellowpages) for another. I have a number of theories about why I believe this happened, however, I'm not spending my precious weekend hours thinking about Telecom (Say the magic word three times : ferrit - ferrit - ferrit - ahhh that's better).

This post is about comparing the growth strategies of two top online auction businesses in a web 2.0 environment. Whilst eBay dwarfs trademe in terms of global market share, trademe can be compared eBay when we consider the respective market domination enjoyed by both companies. It's quite interesting to analyse trademe one year or so on from Sam Morgans famous transaction with Australian publishing mecca Fairfax. Second thoughts on the benchmark sale of NZ e-commerce such as this will no doubt start to surface in the coming months.

Trademe has become extremely dominant in the online retail sector in New Zealand. We are talking serious domination here, the last time I checked hitwise they had almost 70% market share of all traffic relating to online retail sales here in NZ. The upside of this is of course the fact that as a retailer in NZ, its a pretty simple choice when you decide to dip your toe(s) into e-commerce. Conversely, as customers we all know where to go when we want to save $300 on our next Nokia.

So where is the problem here? Well, there isn't one for now. However, a closer inspection of trademe's strategic intent reveals some interesting discoveries when compared to the original online auction that is eBay. Let's compare the two:

As recently as last week, eBay have kick started the implementation of some significant changes to their online strategy. Firstly cutting back their spend on Google Adwords (they were widely regarded as one of Google's largest advertisers). They have also rolled out a very web 2.0 inspired initiative to increase the options that their merchants (sellers) have in managing their eBay stores. The mutually beneficial new technology is focused on allowing merchants to leverage the power of their eBay store on any website whilst giving any website owner the ability to host relevant eBay auctions on their site(s). When I heard of this I instantly yelped Auction Ads!

Anyhow the point is that eBay are obviously looking for more growth. God knows they are accustomed to it. Where do eBay see the potential for the growth they need ? Their most valuable business partner of course - the eBay community! Empower the community, facilitate their use of your technology to succeed - this is the attitude of a strategy team familiar with web 2.0 based methodology.

trademe, like eBay, seem to have also recognised their now corporate driven need for a continued growth pattern .However, unlike eBay, trademe are testing dated revenue tactics such as selling textual advertising in blocks at the bottom of an auction search results page.If implemented, this inventory could represent a significant chunk of additional revenue  for trademe. Trademe generate enough traffic to make the consideration of such a move quite compelling.  However,  as loyal merchants , we should be presented with regular additional site features that are supportive of the community of trademe as a whole. Things like a developer API (Application programming Interface) would be a good start to trademe's future web 2.0 strategy.

Implementing more advertising inventory options on their online real estate proves to everyone that trademe's new corporate owners are indeed long standing members of the ' 20th century printed publication business model club'. Not a good sign for those who feared that the future of trademe could be a little less bright under corporate control.

They also happen to be recruiting for a search engine marketer.A specialist in this area is not optional for a business like trademe so if this roll is new within their organization I would be surprised. Either way this shows a clear intention by trademe to defend the relevant traffic available to them through search engines. After all, search engine marketing was a big factor in Sam Morgans original and wildly successful trademe strategy.

Conclusions

The two strategies of eBay and trademe are almost 'chalk and cheese'. While eBay experiment life without Google, trademe look to recruit a Google specialist for (by the look of it) the very fist time.

Based on what I'm seeing at the moment, I can't help but think that the corporate acquisition of trademe may well have prematurely halted the potential success that their NZ dominant online community represents. If I were involved in the construction of trademe's future strategy, I would be concerned about a number of potential threats. The most notable would be eBay.There is no reason why New Zealander's would not use eBay now. Especially if they offer a better all round solution. trademe can't draw the 'support your local provider' card anymore.

Watch this space I say....

Comments

[tmoney]

great article, however where the hell r your digg buttons? This looks like great great quality digg stuff and it would be much easier to digg it if they were here.. anwayz ill still be digging this, might make me popular!

Cheers.

[graeme]

Hi, Love the article, do you have any more information about the implementing of Web 2.0 with online trading? And are you saying the Ebay have already or heading towards hosting auctions on other websites, like google hosts adverts?

[Ebay Strategies]

Glad to know that ebay strategies have kick started the implementation of some significant changes to their online strategy. Firstly cutting back their spend on Google Adwords. This indeed is a great move on ebay.

[Spencer Thomas]

Okay nice article but I think I have a unique perspective being an expat Kiwi (and avid TradeMe user) who moved to Melbourne and was forced to use eBay (I just listed 4 items in the last hour), and the fact that I have a Bachelor's degree from UofAuck in E-Commerce and Marketing with a focus on Online Auctions.

People forget that a lot of the success of incumbent online auction sites comes from Metcalfe's Law which states that the value of a network (Online auction sites are networks) is equal to the size of the network (number of users) squared. This makes a lot of sense when you think about it - more users mean more sellers selling goods (competition and variety for buyers) and more buyers means higher turnover of goods. Both eBay and TradeMe got their foot in the door of their chosen markets and managed to use their first mover advantage to build to a size that their exponentially growing value was too hard for other competitors to compete with. Given an unlimited budget I'm sure a competitor could dethrone eBay or TradeMe from their respective market dominations but its not economically feasable unless ebay/trademes fees get ludicrous and the end user's switching cost to a competitor relatively drops.

Now, given Metcalfe's law drives the success of these sites, you could argue that user interface and features is not very important - you would be right. TradeMe in my opinion is one of the BEST designed sites ON THE INTERNET. It's intuitive, its functional, it's attractive, it's constantly revised and it's easily navigable. eBay on the other hand is one of the worst (relative to its size) that I have ever seen. It's clunky, it throws up errors (one of which I troubleshooted yesterday and it stumped the livechat helpdesk operator), it charges you to list even BEFORE you've sold the product... downright horrible.

I am SCARED of selling things on eBay and I'm a tech savvy Gen Y who can build his own computer from scratch! If eBay had TradeMe's incredible web design I would imagine that they're revenue would multiply.

[Caleb D]

Really spencer???
I have always thought Trademe looks like a website that some Uni student whacked together on his weekend.
Trademe did well due to the vacuum that existed and cleverly filled it with ease.
Ecommerce in Aus/NZ is at least 10 years behind Europe and has stopped many potential ecommerce entrepreneurs from bothering with that market.Here in the UK the amount of people that use their laptop to order their weekly shopping is phenomenal.
Sam did extremely well and hats off to him.