Telstra Trading Post in uphill battle against eBay: Ovum

Stan Beer
Thursday, 29 May 2008 17:23

Business IT - Technology

Ovum's Hodgkinson says: "While it is laudable to 'have a go', the advantage accorded to the first mover in the e-commerce arena is significant. The Alexa traffic ranking of ebay.com makes it the 19th most popular website in Australia. The Australian site, ebay.com.au is ranked consistently around 366, a long, long way ahead of Trading Post's ranking of 10,871.

"These positions are reversed in New Zealand, where trademe.co.nz captured first- mover slot in 1999 and ranks as the country's fourth most trafficked website, well above even the international eBay site ranked at 29th. The point here is that even eBay has been unable to assault Trademe as New Zealander's preferred online auction site.

"The big value of either eBay or Trademe as the market leader is the depth of buyer and seller reputations - which are proprietary to the platform and create a material loyalty benefit for frequent users."

However, Telstra has deep pockets with which to exploit the current unpopularity of eBay Australia's PayPal move.

"Telstra will need to leverage its full online marketing muscle and invest a considerable sum in advertising to change the preferences of Australia's buyers in sufficient numbers to achieve Trading Post's ambitions. Either that, or eBay would need to do something to seriously annoy its customers," says Hodgkinson.

"Our view is that first-mover advantage in these markets is pretty much unassailable by a 'me too' product, unless the market leader alienates its customer base by ill-judged commercialisation experiments or 'unfair' attempts at further consolidating its market power.

"This possible lucky change in the prevailing wind notwithstanding, we see Trading Post's 'David and Goliath' tilt at eBay as very much in danger of ending in tears."

Telstra's move into the auction space, however, while not knocking eBay Australia off its perch, could force the dominant auction site to back down from its PayPal stance. The Australian public is awaiting the decision of the Australian Competition and Consumer Commission, which is considering whether to let eBay Australia bypass the third line forcing provisions of the Australian Trade Practices Act.