eBay Marketplace Lessons: Building Supply

Sam, great to have you with us today. Can we start by diving into your core lessons from running the marketplace, at eBay?

Obviously, it was very early days, back in 1999, when eBay, in Australia, was the first international operation for eBay. eBay, even though it had already gone public, as a company at that time, a big part of setting up their first international office was really how you were able to build on the core marketplace tenets of supply and demand, in a new market, but plugging that, effectively, into a global marketplace. It was really building the marketplace from scratch. You really needed to start with the supply and I think that’s a key learning for marketplaces, in terms of, it is pure economics; it is supply and demand and what needs to come first. I think you need the supply for there to be a marketplace. Of course, the demand will drive where the marketplace goes, but you really need to have the supply, in the first instance. It was really about building supply.

Some of the other things we learned are, purely about the economics of supply and demand. It was also about the network effects that you’ve got, when you’ve got a two-sided marketplace and the benefits you get from both sides; both from the supply side and the demand side and where that can come from. Particularly on the demand side, it can come from various places that you may not have been looking for. Another key part was the role that merchandising plays. It really is, thinking about the shelves in a supermarket or even going a step further, on aisles in a supermarket and what is the supply that you put on the different shelves. Then how you arrange or rearrange the products on those supermarket shelves. It’s such a really important part of a marketplace. It’s interesting how those offline lessons can be applied to the online world. I know, in early days, wherever the eBay marketplace was, the global marketplace, the US, parts of Europe, or even in Australia, it was really important to look at the categories, which could be used as an analogy for aisles in a supermarket or even shelves, that where you might go from a one or two lane supermarket to an online marketplace that has more than 50,000 categories. So the merchandising that you do and the seasonality of that, you apply the same offline learnings that you would to the online business.

Just taking the first point you mentioned, about supply, what was the biggest challenge in recruiting new vendors and supply, to the marketplace?

Of course, in its early days, the heart of eBay was the collectables business. People and communities all around the world, were coming together to trade collectables. Much was made, originally, of Beanie Babies and whatnot. Collectors provided a ready-made source of supply, for the eBay community. I think it was in 2001 that eBay introduced fixed price. With fixed price, you provided the opportunity for professional businesses and retailers to really come onto the platform and sell in that format. In terms of managing supply, that provided the opportunity for eBay to, effectively, go out and find the type of supply it needed, as opposed to it being more organic and just organizing the shelf space.

It was a matter of identifying where there was excessive demand in the market, whether that was where you saw the conversion rates on products or the average sales price of products increasing, in particular categories. But then, that provided the opportunity to go and engage with either existing sellers or, potentially, new sellers, that you could bring onto the platform.