Ebay has a problem: It’s viewed as a quirky second-hand bazaar. That has stunted the company’s growth, as shoppers in search of instant bargains bypass eBay in favor of Amazon or Google.

eBay’s Buy It Now button, in theory, lets shoppers instantly consummate a purchase. In practice, the Buy It Now button often looks like Click Here to Pay Too Much.

That’s important, because CEO John Donahoe aims to revive the pioneer auction firm’s stalled growth by shoving auctions out of the way in favor of fixed-price listings. The Wall Street Journal reports that Donohoe is pushing eBay’s 25 million sellers to create “mini Wal-Marts” where online buyers can order items bought in bulk by a seller, then resold at a markup. No bidding involved. Instant gratification on both sides, plus one or two-day shipping for a small surcharge.

In an interview with the Journal, Donahoe simplified his vision:

Asked about eBay’s identity, Mr. Donahoe said he wants shopping on the site to offer the same sort of low-price experience as buying at bulk retailer Costco Wholesale Corp. There, “the inventory is somewhat fluid, but everything they’ve got is a great deal,” he says in an interview.

eBay’s change of course has chased off two different kinds of sellers: Those who wanted to remain in a boutique business, such as antique sellers, and those who wanted to sell mass-market goods but felt eBay made it too easy for bigger retailers to come in and steal their customers. Best stat in the Journal story: 16 of the top 100 eBay sellers in January 2008 no longer do business on the site.

With 25 million sellers and hundreds of millions of buyers, there’s no one right answer to what eBay will be. But the brand conflict is simple: Is eBay an auction house, or is it Wal-Mart?

Before you answer, remember that Wal-mart is on of the few companies holding out against the current recession. The Financial Times says part of Wal-Mart’s success is that the store’s brand has attracted “new, more prosperous customers” in search of recession pricing. It comes down to this: Did those same customers think to shop for toothpaste on eBay?

[Photo from Consumerist]

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