Friday, March 26, 2021
This blog post might pre-date many of its readers. eBay Inc. started in 1995, some 26 years ago. To give some perspective of what it used to be like: eBay was fun. It was weird. And all sorts of treasures could be had. It literally was a portal to a garage sale. Commerce flowed...well at least it was partly conducted...on the internet. In the the "old days" you bid on an item, and if you won you sent a paper check to the seller. Depending on the seller, he either held the check until it cleared or shipped the item before it cleared (which of course would change his policy in the future to holding the check until it cleared.)
The item you bought usually showed up in about 2-3 weeks after you won the auction. Maybe. Sometimes it took significantly longer. But usually it showed up. And that's how it worked; you searched this platform for mainly used, broken, or well-loved items and bid on them. The platform was 99.5% composed of individuals either trying to unload a lot of their garage junk or buyers hoping to score a cool collectible, piece of furniture, or an old car.
There was no tax on that purchase because it was conducted "online." A HUGE part (some would say the primary use) of the internet was the free-flow of commerce without the interference of the government. Naturally the internet boomed. For the first decade of eBay's existence the internet actually was a free-for-all place of exchange, commerce, and the opportunity of a liberated society to conduct business. These were halcyon days.
Then things got even BETTER...yes...something called PayPal emerged which allowed buyers and sellers to almost instantly conduct business electronically (for a 3% fee.) This had massive implications. The velocity of sales now exploded. Time on platform increased exponentially. Listings on the platform increased exponentially. The check-clearing problem was solved. This became the stage of eBay nirvana. It lasted for about another 10 years. But something bad started to occur during this timeframe too.
As with every successful venture, eBay had spawned a host of copycats. But that wasn't the beginning of its downfall though, because eBay still had a massive and growing audience on its platform. More and more users became corporate however; the 99.5% of individual "mom & pop" sellers had "transitioned" to maybe 50%...while there was a noticeable influx of companies selling their brands via eBay. eBay repeatedly increased their fees; from listings to final value. Apparently no one with a cursory understanding of economics (ie the "Laffer Curve") worked at eBay. Yet, the platform survived and moved a lot of merchandise....notice I use the word "merchandise," rather than garage stuff. Or hand-made goods. Or old collectibles.
By this time the first wave of competition had crested and the survivors remained; chiefly amongst these rivals was Amazon. It had taken a different approach, one that would position it for dominance in the future. Rather than never taking inventory, Amazon set-up absolutely amazing fulfillment centers which it used for both its own products and for the benefit of resellers on its platform. Amazon also was laser-focused on creating an integrated e-commerce juggernaut. eBay *kinda* was...they had purchased PayPay, StudHub, and a host of other technologies.
At some point the unraveling of all their acquisitions began, and it coupled with a full-court press of trying to squeeze out small sellers and focus on the high-volume businesses on the platform. Fees increased again. Gross merchandise volume (GMV) began to flatline. Up in Seattle GMV spiked...and spiked again. As often happened, politicians realized something very, very successful wasn't being taxed. As the law is written in life, "there is no benefit without taxation." So the campaign began at the behest of alleged "victims" of e-commerce...traditional brick-and-mortar retails stores crying foul over sales tax, even though they could, and did, set-up eBay stores. Something else behind the scenes was driving this purge.
In spite of a conservative-majority (whatever that means), the Supreme Court took the first nail and whacked it into the coffin with the Wayfair decision in 2017. Wayfair mandated collection of Sales Tax on all internet transactions. By this time eBay was already limping along after its abandonment of small sellers and spinning off all its crown jewels (PayPal would go on to be worth far MORE than eBay itself.) Amazon was perfectly positioned at this point to take advantage of eBay's sickening lack of leadership.
Amazon essentially "flipped a switch" and was able to easily enact Wayfair. More importantly, they gobbled up market share and became the most important retail sales platform on the internet. A close second was interestingly enough Wal-Mart, which via tech acquisitions after 20 years of watching the growth of internet retail sales finally decided it was here to stay and got serious. I wonder if it would have taken Sam Walton two decades to catch a trend? Wal-Mart moved rapidly to scale after paying McKinsey millions in fees to tell them they already had a large footprint of stores that could act as fulfillment warehouses. eBay floundered. The second wave of competition, namely Shopify and Etsy arose and eclipsed eBay's GMV.
The second nail in the coffin was happily whacked in place this month by the mis-termed "American Rescue Plan Act" by the hungry, hungry hippos in Washington, D.C. Starting next year, all sellers on internet platforms will be required to be issued a 1099-K for total transactions exceeding $600. Kiss the bloom off internet commerce readers; this is the death knell for individuals and small businesses. Amazon and their ilk will do just fine, as this law essentially codifies their monopolies. Remember, regulation and taxation are friends of big business; small business and individuals PAY, while big businesses skirt the laws and route profits through elaborate tax avoidance schemes. (Unless of course you have a cousin in Ireland who owns your data rights who leases them to your sister in the Netherlands whose son runs the money in Nevada and disperses it in the Caymans to his cousin. Then you're all set.)
For the rest of America, once again our freedoms die in darkness...supported by the billionaire who owns the newspaper whose slogan is: "Democracy Dies in Darkness." The irony cuts deeply. Through a confluence of ineptitude and collusion, the eBay model of commerce which launched and sustained the internet for nearly two decades is dead. It has been killed by politicians and judges on Federal Salaries, with Federal Pensions, and Federal healthcare who don't have garage sales and think "scratching out a living" involves more lobbyist money from big tech or Chinese manufacturing companies. The internet has simply become the fulfillment arm of Amazon while individuals and small businesses will continue to be squeezed out of existence. E-commerce is dead. Long live e-commerce!