Luxury 2.0 - How eBay Could Have Used OpenSocial To Save $61M
A French court on Monday ordered the online auction giant eBay to pay 38.6 million euros, or $61 million, in damages to the French luxury goods company LVMH, owner of the prestigious Louis Vuitton brand. LVMH estimated that 90% of the sales of Louis Vuitton goods on eBay were for fakes.
Fashionphile estimates that eBay was making $3.8 million in fees a year from the Louis Vuitton brand alone (see the Fashionphile analysis), not including other brands owned or managed by LV such as Christian Dior.
eBay's initial defense? It published guides (like this) that would help educate consumers on how to tell authentic Louis Vuitton goods from the knockoffs. That flimsy protection justified countless abuses like one-day auctions of LV goods; continuing to protect eBay sellers who had zero feedback but 50 listings for LVMH products; fake second chance offers; and worse yet, $75 bins for $1000 bags.
After the first cease-and-desist judgment, eBay appeared to clean up. My impression today is that the promise of eBay - "...to provide a global trading platform where practically anyone can trade practically anything" - is going to continue to lose ground so long as they rely on internal automation instead of vendor certification.
This is where I think applications like OpenSocial have tremendous promise. Instead of relying on internal authentication schemes, eBay should ask LVMH and other luxury brands to create and manage their own social networks. In this case, the Louis Vuitton social network would be composed solely of merchants specifically authorized to sell and resell Louis Vuitton goods. Building this network eliminates the argument that it would be "prohibitively expensive" for similar online marketplaces to comply with LVMH's requests...if you can handle simple constructs such as FOAF or OPML an online marketplace can determine if a retailer is legit.