Amazon and Yahoo both say that auctions are an important part of their broader e-commerce strategies. But for both companies, success at auctions is not necessarily about posting more items for sale than eBay, but is rather about pleasing customers by offering them a range of shopping options.
Both have already indicated that they may be willing to pursue niches to cut into eBay's lead.
Forrester Research estimates that gross merchandise sales in the online auction market will grow from $1.4 billion in 1998 to $19 billion in 2003. Sales on eBay represented about half of last year's figures.
In contrast, Forrester analyst Evie Black Dykema estimates that gross merchandise sales on Yahoo Auctions comprised less than 5 percent of the overall 1998 market. Dykema did not have any figures on Amazon, which just launched its auctions site in March.
Yahoo senior producer Susan Carls said Yahoo's auctions area should be viewed as a piece of the company's e-commerce offerings. For example, even if a Yahoo customer can't find a Furby in Yahoo Auctions, she might be able to locate it in the company's classifieds or through its shopping area.
Although Yahoo has some 290,000 simultaneous auctions compared to the 2.2 million auction items available on eBay, Carls, who is in charge of Yahoo's classifieds and auctions areas, believes the auctions space should be divided into different categories, or verticals. She already compares auction categories on Yahoo Auctions with categories on other sites, counting the total numbers of listings in each vertical.
"We see ourselves winning a number of verticals within the auction space," Carls said, but declined to say which ones.
Rodrigo Sales, chief executive of Omnibot, said that by focusing on particular categories, Yahoo and Amazon might be able to compete more effectively with eBay. For example, Sales said, the buzz on AuctionWatch.com, Omnibot's Web site that offers news, information, and message boards for auction enthusiasts, is that Amazon has already developed a reputation as a hot place to go for book auctions.
Amazon might do well to trumpet that reputation, he said. Although auction sellers look at the overall numbers of users of an auction site, they have also started to look for quality bidders who know a particular set of merchandise and its value.
"Some sellers are finding now that they are able to attract better quality bidders from some of the smaller sites," Sales said.
But Forrester's Dykema said that Amazon's best chance for besting eBay is by exploiting another niche. Instead of playing up particular categories of auctions, Dykema said, Amazon could succeed by focusing on business-to-consumer or merchant auctions. eBay's roots are in the person-to-person auction space.
Amazon jump-started its site with some 100 charter merchants, though some of those merchants have pulled out of the site. Still, Dykema said eBay is likely to stay in the person-to-person space, leaving the merchant auctions open for Amazon, which has the "best shot" of competing with eBay, she said.
"eBay is not realizing the demand" for business-to-consumer auctions, Dykema said. "They are missing the boat."
But Marc Johnson, director of Jupiter Communications Digital Commerce Group, said that it will be difficult for either Amazon or Yahoo to topple eBay in online auctions. With its purchase of auction house Butterfield &Butterfield and its acquisition of car auctions specialist Kruse International, eBay has been connecting to the offline auction world and shoring up at least one of it vertical areas, Johnson said.
Johnson said that Yahoo and Amazon should try to view their auction sites as direct competitors with eBay, though the two sites offer far more than just auctions.
"Even if they 'lose' the auctions game, they can still win in the scope of their broader businesses by making their sites more sticky," Johnson said.