eBay reported its first-ever quarterly sales decline amid industry fears it may not be able to compete with its peers due to an inferior IT set-up.

Total sales increased 12.1 per cent to $2.12 bn (£1.2bn) in the third quarter of 2008, but that is also a dip of 3.6 per cent from the quarter before, which is a first in the company’s history.

eBay chief executive John Donahoe said the business was engaged in a cost containment plan, but would continue to “stay focused” on the connectivity of its various e-commerce platforms.

But the company needs to pay more attention to its back-office arrangement to maintain competitiveness in the online business, according to JPMorgan analyst Imran Khan.

"We believe eBay's biggest challenge is an inferior technology platform, which is making it difficult for the company to compete with other e-commerce platforms, such as Amazon's," said Khan.

"We think that if eBay fails to improve the user experience, it will inhibit future growth even when the economy recovers."

In a gloomy statement, the online auctioneer also reduced its annual earnings predictions, saying that revenue in the fourth quarter of 2008 would reach $2.02bn to $2.17bn (£1.17bn to £ 1.25bn) down from $2.18 bn (£1.26bn) in the same period a year ago.

The value of goods that users sold on eBay sites also fell by one per cent.