How did eBay Become the Company Everybody Loves to Hate?

Posted on June 30, 2008. Filed under: eBay | Tags: , , , , , , , , , |

With the news today that eBay was ordered to pay $61 million to settle a lawsuit in France and the news that the Australians are preventing eBay’s plans to require 100% PayPal for all sellers for all listings, there has been much cheering from the sidelines.  It seems that there everybody is celebrating eBay’s misfortunes.  It is understandable that eBay’s competitors, like Google, Amazon, and Craigslist, would be rejoicing today but there are literally hundreds of websites, blogs, and bulletin boards where thousands of people are doing the “Happy Dance”.  It is crystal clear, even to eBay, that there is widespread anger toward eBay.  So the question is “How did eBay Become the Company Everybody Loves to Hate?” 
To answer that question, I want to focus on the group of folks who are the most vocal about their feelings of eBay  – the eBay sellers themselves.  In the beginning, sellers loved eBay because it was fun and it was easy to make money.  Over time eBay and sellers developed a love-hate relationship because eBay continued to take more and more of a margin from sellers and because eBay began exerting more control over sellers without considering the impact.  It became very much a one-sided relationship with zero communication back-and-forth so the “love” portion of the emotional equation lessened with each passing year.  Sellers’ dislike of eBay and all of eBay’s increasing rules and fees have always been known but 2008 has become the year that sellers deep resentment of eBay has reached a boiling over point.
In order to understand their strong emotions about the company that they used to love, I think it would be easiest to understand eBay sellers and how the changes eBay has made has affected them personally.  There is great diversity among eBay sellers not only in the items each sells and where sellers are located in the world but also in their reasons for selling on eBay.  eBay categorizes sellers based on the size of their sales  – small sellers versus Powersellers and among the Powersellers there are tiers including the new “Diamond” Powerseller tier.  And Griff, from eBay, has categorized sellers based on when they leave feedback – A1 sellers versus A2 sellers.  However, to really understand why sellers resent eBay so much I categorize sellers based on their intentions.  Let me explain:
Level H eBay seller – Hobby Seller  This group of eBay seller is characterized by the desire to sell on eBay because they want to not because they need to.  The Hobby seller may actually perform as a business with the proper business licenses and such but they do not depend on their eBay income to survive.  Many hobby sellers use their eBay “profits” to fund their own purchases.  For example, someone who collects trains may sell his excess trains or excess tools in the garage and then use those funds to buy trains from a business seller.  And there are hobby sellers who are retired, with a pension, and sell on eBay for the social aspect.  The main characteristic of this group, though, is that they have sold on eBay because it was “fun”.
Level P eBay seller – Profit Seller  This group of eBay seller is characterized by their need to sell on eBay for the income to support themselves and, in some cases, their employees.  Level “P” eBay sellers are most likely also Powersellers but not necessarily so.  eBay sellers who depend on their part-time eBay income also fall into this seller level.  Many eBay sellers began as hobby sellers and then developed into profit sellers. 
Level S eBay seller – Scammer Seller  This group of eBay seller is characterized by their intent to sell on eBay fraudulently.  This group of sellers includes two main groups, the hit-and-run seller and the counterfeit seller.  The hit-and-run seller intends on selling items they do not have.  There have been entire websites developed instructing people on how best to take the money and run on eBay.
The first sellers on eBay were Hobby Sellers, some of whom did so well on eBay that they developed into a business that sold on eBay for profit.  And, once the eBay community grew, some companies outside of eBay decided to try their hand at selling on eBay as well, although most of these companies have not been successful in their efforts to sell on eBay (but that is a topic for another time).  And then, of course, the number of eBay sellers increased with the entrance of the Scammer Seller who saw the great opportunity provided by eBay, a site that was not monitored or policed.
In the beginning, eBay fees were reasonable and well worth the price.  But, over time, eBay kept raising the fees until they literally “fee’d” sellers to death.  The Hobby Seller complained about the fee increases over time and some stopped selling because it became too cost prohibitive but most just absorbed the fees and continued to sell year after year.  After all, the shrinking profit they were making did not affect their ability to be able to feed their family since they did not depend on their eBay income to survive.  And with little or no overhead, they could afford the costly eBay fee increases.  Finally, the hobby seller continued to sell on eBay despite the enormous fee increases because it was relatively easy to sell on eBay and the Hobby Seller didn’t have the desire to strike out on their own and create their own website or sell elsewhere. 
The Scammer Seller, of course, did not like the fee increases but tolerated them because of the great money they were raking in on eBay.  And, then again, the short-term scammer sellers could always disappear before their eBay bill was due.  It is the Profit Sellers on eBay that had no choice but to make changes when eBay’s fees rose to such a level that they could no longer afford to sell on eBay.  At a time when eBay’s fees became cost prohibitive, there came along Amazon with a wonderful business model that enticed a great many eBay Profit Sellers.  And, of course, many Profit Sellers on eBay who did not have an ecommerce website developed one.   Thus, the beginning of the mass exodus of buyers to other sites.  It was eBay’s greed that caused their own sellers to find a better way.  Good eBay sellers simply could not afford to sell on eBay because eBay took too much of their margin.  And the sellers who stayed behind to sell exclusively on eBay simply could not afford to provide excellent customer service because their margins did not allow for it.   And the buyers who stayed behind then had a much greater chance of purchasing from a seller who provided poor customer service.
Fast forward to 2008 when eBay decided to make dramatic changes and force sellers to change.  eBay has declared war on the Scammer Seller, as they should.  But eBay’s dramatic changes have affected the eBay Hobby Seller and Profit Seller tremendously as well.   Profit Sellers who were “fee’d” to death on eBay had to cut out something and customer service was usually the place where cuts were made.  Profit Sellers understand the need for good customer service but when someone is working twice as hard as before just to pay the eBay and Paypal bill then something has got to give.  What eBay did was to give these sellers a whole new set of rules without giving them any kind of relief from the burden of paying high fees.  If eBay had lowered fees so that sellers could reinvest in customer service then it would be reasonable to expect a better level of service by eBay sellers.
And the Hobby Sellers who wanted to provide good customer service do not have at their disposal some of the tools that Profit Sellers have – for example the ability to send an email to a buyer with an attached prepaid label if an item needed to be returned.  And, of course, because Hobby Sellers do not need the income they could treat customers badly if they so chose because they were not motivated to maintain a good reputation to encourage future business.  eBay’s recent changes telling all sellers to Shape-Up-or-Ship-Out gave the message to the Hobby Seller that they must Step Up Their Game and function more like a high-volume Profit Seller or there would be no place for them in the “New eBay”.
Now, while a great many of the Hobby Sellers have stood by and absorbed the fee increases they are not standing by quietly while eBay has demanded they reform themselves into a high volume Profit Seller.  Most of the eBay Hobby Sellers I know have either stopped selling on eBay completely or have plans to be sold out of their inventory by the end of this year.  And this group of eBay sellers has lots of time on their hands and seem to be spending their time on a new hobby – making lots of noise on the internet about how they are angry with eBay. 
Ebay Profit Sellers who saw their profit margins shrinking began quietly exiting eBay years ago.  Those who did not leave previously are taking immediate steps to reduce their dependence on eBay if they are not leaving eBay altogether.  And, of course, those Profit Sellers who were too near the brink of disaster from the years of shrinking margins are disappearing involuntarily from eBay under the weight of the new Seller Requirements.    
There is a huge volume of  sellers being pushed out, kicking and screaming, and most of those who are remaining are incredibly fearful and angry.  I would be curious to know what kind of a seller base eBay envisions for the future.  In eBay’s vision for the future, every Scammer Seller would be gone but I’m not sure eBay is putting forth all the resources necessary to make that happen.  And I just can’t imagine how many Hobby Sellers, given that they don’t need the income to survive, will choose to stay even if they are given the choice (and for most Hobby Sellers it would only take one bad buyer to cause a Seller Suspension).  So the unique products offered by the Hobby Sellers will disappear from eBay and I don’t know if eBay even cares or can afford to care about the long-term impact of losing its Hobby Sellers.  The Profit Sellers who remain on eBay will most likely be using eBay as a liquidation outlet, making sure to list the new and hot items on their own ecommerce websites or on places like Amazon where buyers are willing to pay a higher price.  The eBay community I see in the future looks grey, dull, and cheap…. but the smaller, less passionate, community will certainly be a lot less vocal about their dislike of eBay.



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8 Responses to “How did eBay Become the Company Everybody Loves to Hate?”

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This is an incredibly insightful analysis.

I was one of the hobby sellers you mentioned. For nearly five years I bought and sold large amounts of collectible stamps, building my collections, and selling to recover costs of investments. By this past tax year, I was grossing over $30,000 annually, with plans to keep increasing.

But I had already begun to see that the Ebay fees were killing me. So many last straws, one of them a couple months ago when they changed to stores so you cannot even list an item to sell for less than a dollar, for instance.

By the time I closed my store and let my final auctions expire three weeks after the feedback disaster went into full effect I was paying 28% monthly of my gross in Ebay fees. That does not even factor in the PayPal fees on top of that. Define USURIOUS. Oh. Sorry. I just did.

Given all of that, the feedback debacle was the last straw.

I have moved my stamp business to another site specializing in stamps and coins, I just finished my first month, with sales only 1/6th my usual mimimum gross on Ebay. But given I was starting cold with no reputation, I can’t complain. The fee structure is incredibly low and reasonable compared to Ebay. And frankly, the seller interface, and automatic invoicing of multiple auctions makes the Ebay system look like the kludged nightmare it was.

At this point, I am not sure I would go back to Ebay even if they fixed the feedback mess, and restored reasonable mutual pressure to work out problems between buyers and sellers. The scam and extortion of sellers has become rampant. In the final year before the last three weeks I sold after feedback changes, I had two non-pays. I had eight the last three weeks. All but one finally paid, but it took filling claims on all eight of them. The one was a total loss. That is a non-pay jump from about 2/1000 of a percent to 20%, comparing the previous year to the last three weeks sales of 40 items.

I think that stat alone summarizes just how badly Ebay management has screwed the company and its role, image, and customers, buyers and sellers.

I have said it in forums on Ebay, and will repeat it here.

A couple of years from now, Ebay will be added as a cautionary tale to the textbooks in business school in the chapter on tipping points to disaster and collapse of good companies brought on by incredibly inept, stupid, and short-sighted management.

Great article! Very insightful.

EBay’s greatest (and maybe only) asset was always its sellers, but for some bizarre reason, eBay management never understood that. They have alienated and angered their own customers (i.e., sellers) on every level, and in every way, offending, insulting, calling customer dissention “noise”, and disrespecting sellers in every way possible. People might have been willing to ignore the insults, but not when they’re forced to work twice as hard to make half the profit.

EBay succeeded DESPITE eBay management, not because of it. EBay’s success was a phenomenon, and the suits and shirts and MBAs and bean counters who run eBay never learned about that in business school, and never understood what it was that made eBay succeed in the first place, so when things started going off course, they had no way of working out how to fix it. Instead, they managed to do away with their own greatest asset: their sellers.

[…] on eBay. In the beginning, I was a hobby seller ( See my article that defines eBay seller types – HERE ) as was most of the eBay […]

Great post on why so many people dislike eBay. Far too many of us over committed to the brand and many of us thought eBay let us down by going to the masses and forgeting (to a certain extent) about who built thier empire.

I think many people who have been wounded by thier eBay experience, must learn from what’s happened and leverage thier mistakes for future growth inside and outside of the eBay space.. Again a wonderful post…

Michael Perry
Author of “The Book Power Seller’s Hate 5th Edition”

[…] a blog post titled “How did eBay Become the Company Everybody Loves to Hate?” (click HERE for that article) and in it I classified sellers into three groups – Hobby Sellers, Profit […]

all i see is that ebay are not interested in listing to the geniune eelelrs they have now hung themselves they suspend you for no reason and thats it did we not sign a agreement when we registered with ebay but have thewy not broken there own agreement when they suspend you for no reason what so ever ebay suckssssssss

They became that company when they lost sight of the pure genius that set them apart. On every other site, the stuff just sat on a shelf. On ebay, the items moved in a stream, a steady procession from the bottom to the top. It was an ADHD shopper’s dream. You could find ANYTHING …and sometimes two of them!

Sellers had it real good, too. When listing something, the thought in the back of the seller’s mind may have been, “will anyone buy this” …but no one ever wondered “will anyone see this”, for there was no doubt that all got their 15 minutes of fame. That fear of no exposure simply wasn’t there.

It was this way of presenting items- this churn- that defined the original ebay. I always assumed the government would stop the music, but never ebay mangement themselves.

I fear that in a few short years people will forget how well the system worked and how elegantly simple it was.

You can’t run auctions with a pay-per-click advertising mentality, as we’re now starting to see. A level playing field isn’t necessarily giving away “ad spots” for “free”, if that freedom is a site’s entire value proposition. Ebay in its original form proved an extremely useful tool to society and civilization as a whole. So much so that the Department of Commerce should have swooped in and taken it over. It was just that utilitarian.

The internet took a huge step backward with the loss of Liiteral Keyword Search/Time Ending Soonest and I’m slackjawed that no competitor has stepped in to offer pure auctions, (ie without bin or SCO’s) in this format.

It may be gone forever.

There is We’re working as hard as we can to fill the void ebay is leaving open. We’re the top marketplace for stamps online and recently grew our postcard category into the #3 spot on the web with #2 likely to be reached in a couple of months.

The key distinction is that we’re very much in the mold of the old ebay. We’re collectors ourselves and we take major pains to make sure our customers can reach us, interact with us and provide feedback for what needs to be improved for their specific collectibles category.

I don’t personally feel that what ebay is doing is in any way sinister but that it believes it needs to go in a different direction that doesn’t meet the needs of many in the previous community. Of course many of us do disagree with that choice but that’s a different discussion.

If you’ve got collectibles and you’re looking for the nostalgia of the old ebay magic don’t forget to give bidStart a look.

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