eBay Needs to Find a New Set of Tools to Motivate Sellers in 2009

Posted on September 24, 2008. Filed under: eBay | Tags: , , , |

eBay really is just a venue.  They depend on sellers to list items so that the site will have a great variety and they depend on sellers to make buyers happy so that buyers will continue to return back to eBay.  Because eBay does not sell anything directly to buyers, they absolutely must ensure that sellers perform their duties.  But in their effort to “encourage” sellers to do what they want, sometimes eBay is not thinking about how best to “motivate” sellers.  And, as a result, sometimes eBay’s actions have unintended effects.  For example: 
 
 

1. Prohibiting check / money order as an option (coming October 2008)

Predicted Result: eBay sales will decrease.  Off-site sales will increase.  Net effect for sellers is only a slight decrease in sales but net effect for eBay is noticably decreased sales, especially in the collectibles category.

Details: Because buyers will no longer know which sellers are willing to accept check and money order, a buyer will have to contact each seller to inquire as to the seller’s payment policies.  This will have the effect, first of all, of creating more work for the already over-worked eBay seller.  And, if a seller is now going to take their valuable time to communicate with a potential buyer about payment methods it is a great opportunity for the seller to mention that eBay’s new policies prohibit payment by check or money order but that the seller has a great website (or other venue) where the same or similar product can be ordered and where checks and money orders are accepted.  Sellers will have to take more time to communicate but will be rewarded with an order outside of eBay which means no eBay or Paypal fees, in essence the “no selling fee” compensates the seller for the time they take to communicate with the buyer.

 

2. Increase in Selling Fees for Successful Sellers (twice in 2008) 

Result: Successful sellers continue to move to alternate channels.

Details: Twice in 2008, eBay has “revised” fees and claimed that these revised fees have lowered the selling fees for most of their sellers.  However, the total selling fees for SUCCESSFUL eBay sellers (ie those sellers who have a good sell-through rate) have been raised both times.  

Successful eBay sellers are the people who have the skills necessary to be successful elsewhere and they are finding it more difficult to remain successful on eBay.  These sellers are moving their inventory where they are making more margin for significantly less effort.

For example, if we have an item with a Manufacturer’s Suggested Retail Price (MSRP) of $100, then we have on average a gross margin on our own website of $34, on Amazon the gross margin is $25, and on eBay the gross margin in $12.  The Gross Margin is the Selling Price less the product costs (costs we pay to the manufacturer to obtain the product) and less the selling fees (including payment processing fees) we pay to Amazon or to eBay / Paypal.  So to put it in a little different format:

MSRP $100 item
Gross margin – website $34
Gross margin – Amazon $25
Gross margin – eBay $12

The reason that eBay gross margin is so much lower is actually the function of two things – higher selling fees paid to eBay and lower average selling price.  For an average item, the eBay buyer will not pay as much as the buyer who purchases from Amazon or directly through our website.  In addition, we have to pay eBay an insertion fee per item as well as a final value fee per item which always comes out to a higher percentage than Amazon.

So, in essence, we have to sell twice as much volume on eBay to make the same money as Amazon or three times as much volume on eBay to make the same money as our website.  That, in and of itself, is a problem.  However, the even bigger problem is that the amount of effort to make one sale on eBay is about 9 times more than the effort through the alternate channels.  Communicating with eBay buyers is so labor intensive because they require so much more hand-holding and eBay actually encourages unnecessary communication and punishes sellers who do not do so (for example, in the recent Town Hall meeting, Stephanie suggested that sellers should email every buyer personally who pays with an echeck to explain the echeck process and let the buyer know that their item will be shipped when the echeck clears).

If we adjust the gross margins based on the EFFORT we put forth to actually generate a sale and to follow through on that sale (including begging the buyer to finally pay for the item they purchased) and the after-care of the sale, our table would look like this:

MSRP $100 item (adjusted for order generation and processing time)
Gross margin – website $34
Gross margin – Amazon $25
Gross margin – eBay $1.33

Now, it doesn’t take a rocket scientist to realize that we should be continuing our efforts to move off eBay.  We do see eBay still playing a role, however, in our 2009 online selling strategy.

eBay is still good for two things for us – (1) cashflow and (2) selling rare items.

Whenever we have items that are not moving as quickly as we had hoped, we can turn to eBay to liquidate that product which helps to improve our cash flow.  Additionally, we sometimes have rare items that we put up for auction and eBay is the place where we can get the highest value for those items.  For example, we recently had some items we purchased for $78 that were very hard to get (and we only got because we purchased large amounts of “standard” product).  We put one of the items up for auction on eBay and it sold for more than $300.  For the average every-day sales, though, eBay is definitely NOT the venue we plan to focus on in 2009 because our margins are higher elsewhere and our efforts are considerably less elsewhere.  

3.  Glitches in listing and site functionalities along with Poor Communication and Forced Participation in Beta Tests

Result: Sellers list less because it takes too long and because they have no confidence in the eBay system (ie Best Match).  Additionally, sellers forced into beta tests refuse to provide quality feedback about the eBay system and thus the system continues to function poorly.

Details: eBay has miscommunicated, either intentionally or unintentionally, so many times this year and the miscommunications have resulted in a lack of credibility.  The glitches on eBay and Paypal are so numerous that it borders on ridiculous.  In addition, eBay either can’t or won’t explain the Best Match system and sellers have little confidence that the system is working as intended.

4. Marketplace Research Removed September 2008 (eBay still charges the same for mid-level store but provides fewer services now)

Result: Lower average selling prices on eBay since more sellers will use auction format.  Sellers move more toward alternate channels since the first place for research will now be other than eBay.  Decreased buyer satisfaction when sellers cancel mid-level store subscription and cease using automation services.

Details: Until this month, eBay’s Marketplace Research was a service included in a mid-level store.  There were really only two good reasons to pay $35 more a month (difference in price between basic and mid-level store) and those two reasons were Marketplace Research and automation services (leaving feedback automatically, emailing buyers automatically when item was won, paid for, and then when shipped).  Without Marketplace Research, the price of the mid-level store is no longer cost-effective for many sellers.

Marketplace Research allowed sellers to view all sales that occurred in the last 60 days, for example.  Basic search on eBay only allows sellers to see items that have sold in the last 2 weeks on auction or when a fixed price item ends (either because of time or because all the quantity has been purchased).  eBay store inventory sales does not appear in the completed items search on eBay.

Without Marketplace Research, sellers may downgrade their store subscription thereby ending the ability to use automated tools as well.  The result is that buyers are not kept as informed about their order as they were before and thus are not quite as satisfied as before.  

Without Marketplace Research, many sellers will not have a good idea of the true current market value of their product.  Therefore, they will be more likely to sell the item on auction, rather than fixed price, if they are going to list it on eBay.  And, typically, items on auction end at a lower amount than on fixed price unless the item is very rare.  Auctions, which are given preference in the Best Match because of time ending soonest and also incur less total selling expenses than selling on fixed price, have become somewhat attractive again.  But auction listings will still end at lower amounts than the items on fixed price thus bringing down the overall average selling prices on eBay which is not good for any seller.  Further erosion of the margins on eBay will cause more sellers to fail.

And multi-channel sellers who list on Amazon will be more likely to make Amazon their first stop for research since eBay Marketplace Research is no longer available.  As an Amazon featured merchant seller, I am more likely to list an item on Amazon if I see that the listed price for the seller who owns the Buy Box is in the ballpark of what I would offer the item for and if there are only a handful of sellers who have the item in stock.   My item will never make its way to eBay if I am happy with my chances on Amazon.

5. eBay’s Main Mission of Forcing Free or Significantly Reduced Shipping

Result: Decreased buyer satisfaction when sellers block buyers.  Lower international sales as sellers restrict items to domestic shipping only.  Decreased variety on eBay as sellers move their product to higher margin sites.

Details: There is no question that eBay is using its incredible might to force sellers to offer free or significantly reduced shipping.   The number of carrots and sticks which directly relate to shipping cost is almost laughable.  

Sellers are reacting but not all sellers are reacting in the way eBay would like.  Many sellers are blocking potential buyers who question the shipping cost in advance of bidding as well as blocking buyers who leave feedback and whom sellers suspect might be leaving low DSRs.  Sellers view buyers with great suspicion because of the extreme importance of the shipping DSR.  The shipping DSR determines eligibility to sell on eBay as well as Powerseller discounts.  Sellers are turning away sales from buyers whom they think might lower their DSR scores and that certainly can’t be helping buyer satisfaction.

Sellers who offer their items to international customers are finding their DSR scores are lower because the cost to ship internationally is significantly higher and there are many problems inherent with shipping outside the U.S., all of which lower a seller’s DSR scores.  The result is that many eBay sellers no longer offer items for sale internationally.  Personally, we sell in many categories on eBay and we are now only offering international delivery for three different categories and by the end of the year we expect to offer international shipping in only one category on eBay.  We simply cannot afford the lower DSR ratings.  It is a tough trade-off.  We accept international sales and jeopardize our eligibility to sell on eBay at all or cease international sales to continue to sell to U.S. destinations on eBay.

Above all, the bottom line is that there is simply no margin for our eBay sales to offer free shipping and the more eBay pressures us to do so, the more we are going to move off-site and/or the more we are going to promote our own ecommerce website where we can offer special “free shipping” promotions when it makes economic sense and at the times of our choosing.

6. Feedback System Lacks Transparency and Simply Does Not Work

Results: Lack of transparency results in good sellers being punished without knowing why.  Lack of transparency also causes some sellers to erroneously block “good” buyers and more sellers restrict buyers through the Buyer Requirements.  Buyers work around the blocks, though, creating very angry and frustrated sellers.

Details: Because the Detailed Seller Ratings are anonymous, sellers cannot attribute the scores to any one buyer and thus sellers sometimes block a group of buyers so as not to have a bad buyer return and leave low DSR scores again.  There are some sellers who are so frightened they are behaving quite irrationally because eBay has set up a current system where it is almost impossible for sellers, especially small sellers, to succeed.

The lack of transparency also means that sellers do not know when buyers are upset and, thus, sellers face sanctions or suspensions without even knowing they are in danger.  eBay does not inform sellers when an “unhappy buyer” leaves a “1” or “2” rating so a seller would not be aware that they are failing to make the buyer satisfied.  The first time a seller would know a real problem exists is when eBay suspends them for having a buyer dissatisfaction rate greater than 5%.  A seller knows when an unhappy buyer leaves a negative or files a paypal dispute but a seller is never informed that an unhappy buyer has left a poor DSR rating until it is too late.

In an effort to protect themselves from bidders who do not pay or who engage in feedback extortion, for example, sellers can use buyer requirements to block bidders who have too many policy violations but that system does not work.  Buyers who are blocked just email sellers asking for exception to the requirements, going to great lengths to explain their transgressions or to explain how they were not at fault.  And when that doesn’t work, the buyer just purchases the item with an alternate I.D. or asks a friend or neighbor to purchase and they the original customer makes the paypal payment.  The frustrated buyer, who is not happy at having to “go around the system” to make the purchase, often leaves unfavorable DSR ratings for the seller.

7. Overwhelming Number of Policy Changes, Many of Which Require Listing Revisions

Result: Sellers are leaving, either in whole or in part, because it requires too much effort to stay.

Details: Because so many policy changes require listing revisions, the time investment for eBay sellers is significant.  For example, there is no bulk editing tool for sellers to use to create or revise their return policy.  eBay had promised a bulk editing tool but has not provided one and, at this time, has no plans to provide any way for sellers to comply with the policy other than to revise every listing one by one.

Many sellers I know are simply throwing up their hands.  Their thinking is that if they have to invest time and energy into manually revising their eBay listings again and again and again, then it is in their best interest to go somewhere else.  They feel that their investment of time is better spent building their business elsewhere rather than recreating their business ten times on eBay in a year.  Most sellers I know are not completely abandoning eBay but rather they are preparing their other venues for the holiday season and will spend whatever time is remaining, if any, to prepare their eBay store for this holiday season.  

CONCLUSION:

I know what eBay is trying to achieve and I can appreciate the vision they have for their site.  But eBay cannot achieve their objectives by coercing sellers.  In the past, eBay has used fear, threats, and intimidation to control their sellers but the days when eBay could force their will on sellers is now past.  There are simply too many alternatives and the benefits of selling on eBay just aren’t what they used to be.   Five years ago, eBay could say to a seller “It is my way or the highway” and a seller would conform.  Today, though, that same directive is not nearly as powerful because sellers are finding the highway is full of hustling and bustling and there are some very attractive new destinations both near and far.  More and more sellers are taking eBay up on their offer to “Hit the Road” if they don’t like the changes.  eBay really needs to reach deep into their tool bag to find a new set of tricks that will motivate sellers in 2009 because the Big Bully routine is old and ineffective now.

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21 Responses to “eBay Needs to Find a New Set of Tools to Motivate Sellers in 2009”

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CONCLUSION:

It will be a miracle if eBay are still around this time next year….this year has seen the largest amount of sellers ever moving away & I guess Jan 09 will see a massive move of the hang-on sellers for Christmas

A Very sad state considering all the eBay sellers still paying massive fees every month..for more & more work with less & less profit if ANY !!!

Not enough carrot and too much stick. It would be different if eBay was bringing in the buyers, but sell-throughs, ASPs, and even listing views are way, way down compared to years past. I’ll still be selling on eBay, but I’ve spread out to several other venues as well. Instead of getting them to toe the line, eBay is chasing the sellers away with that big stick.

brewnews, Very well written indeed.

If you know what ebay is trying to achieve, please tell the rest of us. For that matter, tell ebay, as they change their minds every five minutes. They are chasing a chimera, a model formed in their minds out of the abstract, aggregate numbers gleaned from their surveys, whose connection to actual sellers and buyers is tenuous to say the least. Either they have forgotten that they are a service provider or they never knew it. Nobody who understood it would spend years degrading their service while hiking their prices, and insulting their paying customers to boot.

tj, ebay will still be around next year. They are much too large to go to zero that fast. But if Q4 is a bust, they will be under different management and possibly different ownership as well.

Personally I think eBay is being run by a bunch of lunatics or if they do have a plan and we (all of us) are not in it. If that is the case and they do have a master plan that would be the same as trying to get the United States to drive on the left side of the road or Wal-Mart saying that we are not selling this junk any more and we are just going to deal in high line merchandise.

As they follow this path eBay will not be around 3 to 5 years from now and all of the different groups of sellers will be fragmented in specialized selling venues.

Well it was fun while it lasted.

Check out this article Ina is writing up for tomorrow:

http://www.auctionbytes.com/cab/abn/y08/m09/i24/s01

Bill

Excellent indeed.

Sells are so low I have read several posts on discussion boards of sellers declaring that if the month continues at the current pace they will not be able to pay their eBay fees. This is both sad and frightening.

[…] The syndicated column is published in antiques journals and newspapers in the US and Canada…eBay Needs to Find a New Set of Tools to Motivate Sellers in 2009: (The Brews News)eBay really is just a venue.  They depend on sellers to list items so that the […]

CONCLUSION:

Sorry to use such strong language, but eBay is being run by assholes.

A management change is in order. Sooner or later, their number ARE going to be down, and that’s when it will happen. Unfortunately, eBay has created a “no confidence” situation with it’s seller base, which will never trust them again. eBay has NO idea the anger and hate they have created. You WOULD think that after almost a year of reading angry and frustrated comments from sellers and buyers would give them the slightest inkling it isn’t working.

As far as blocking buyers goes, I wish the “Buyer Requirements” were even more stringent. I’m having a particular problem with nonpaying bidders who join eBay on the day they bid, have zero feedback, and never respond to emails or pay. It’s like they join for the sole purpose of #@&%’ing up your auction and nothing else. I would LOVE to be able to block bidders whose feedback is ZERO or even less than 5. For crying out loud, why can’t they VERIFY buyers?

This is RIGHT on the nose.

I was just thinking about some of this stuff this morning before I read this…

eBay has made it SO BAD that I actually have become apathetic.

I don’t answer questions for DAYS and I’m not as prudent getting my shipments out.

When a person feels hopeless, they’ll leave. I’m mentally gone. Is that their intentions?

In every business there is a point where sales start lagging and the novelty or “fresh” value becomes stale. It is necessary to re-invent oneself regularly and come up with new ideas that create some stimulus.
Ebay over the past 2 years have aimed their focus on revenue without due consideration to the basic values important to the average every day buyer and seller. Their marketing structure was purely fear based in enticing buyers to pay by paypal. Their “protection” campaign aimed at scammers involved some characterisation of some rediculous little Al Capone amongst other messages where we are suppose to make some mental leap that they protect us all, but quite the contrary, many have interpreted it as Ebay is really not a safe site to buy or conduct business.

Coupled with higher selling fees and punishment through the new feedback system, paypal accounts frozen, charge backs and low DSR resulting in suspension. It really has become an angry environment for the honest seller who has no choice but to move out.
Honesty is never compromised but when support by ebay is not due to those who live by those standards, they will leave.
I have and I feel liberated.

[…] post was inspired by The Brews News’ “eBay Needs to Find a New Set of Tools to Motivate Sellers in 2009&#8243…, which you should certainly also […]

Great post – sums up my feelings on a lot of the issues raised.

[…] eBay Needs to Find a New Set of Tools to Motivate Sellers in 2009 […]

Great post and well researched too.

But we shouldn’t blame poor little eBay solely for lack of transparency. For those who haven’t noticed it yet – lack of transparency is endemic on the web. Almost every person and business can hide their true identity and true means of intent behind a nickname or set of numbers or a picture of Paddington Bear or Mickey Mouse.

Verbal communication has almost ceased to exist – and in eBay’s case, and in many others, it never existed in the first place.

Let’s face it. If everyone had to leave their photograph, name and address and personal phone number and social security number every time they communicated with someone – only 0.00001% of the planet would probably use the web at all!

The www is a true wonder of technology, which, like all technologies can be used for good or bad – but the transparency issue is something entirely against the grain of age old customs and traditions of humans trading with each other and therefore we each have to address that vital issue on a personal or economic basis.

Has anyone thought what it would be like if eBay or PayPal or some other totalitarian organisation even attempted to offer live Telephone or live eMail Support? Think about it – billions of people from hundreds of nationalities and tongues – asking some dude or nerd at eBay for help in selling kitten baskets? They would need to increase their staff by around 250,000 – and still the lines would be jammed or go into meltdown.

The www is simply too big for its own boots – and the only opportunity ordinary users have had so far (to cut it down to size) came with the invention of blogging!

Bloggers talk ABOUT other people or firms – not TO them. Its the old garden fence scene – gossip, moaning their woes and fear being transmitted around the community – albeit that the www community is a billion times bigger than two old crones gabbing to each other.

But its like them moaning of the local feudal lord up in the castle – knowing they would never be in a position to challenge the tyrant face to face.

We know that eBay have sales charts like everyone else – and if that critical line starts to dip bigtime – the incumbents will be fired – that’s what you get for lack of transparency and insulting your customers.

Remember; everyone has a boss and (paradoxically)its ALWAYS the customer!

[…] An excellent, excellent post from The Brews News: if you haven’t already read this one, please do. […]

Meaty post Brewsnews.

People are really upset that it is all intentional. Disruptive Innovation:

http://genuineseller.com/ebays-disruptive-innovation-hows-that-workin-for-ya/

Brews-

Do you think Ebay is aware of how deep the animosity is toward them. The genuineseller blog mentioned in the above post really got people riled up on the seller central discussion board. John Donahoe is playing with people’s lives during a very crucial, terrifying time in history.

I think Ebay could honestly bail out their tarnished reputation by suspending Best Match, abandon those damn ridiculous DSR stars and just quit making anymore policy changes for awhile. America is hurting. Ebay is a great vehicle to help out with the rising costs of living, not to mention all the people who currently depend on their Ebay income for a living and have employees who depend on them as well.

I personally think that disruptive innovation article is the writings of a lunatic. What is wrong with the leader of Ebay? Does he not see the substantial damage he’s caused, the ill feelings, the justified anger and frustration?

It’s a crazy world right now. I long for some stability and Ebay could give us that gift.

Just some thoughts on “Best Match” and “DSR’S”…

With the current “invisibility” of the Best Match algorythm, Ebay can do what they please.

They could favour any large seller as a sweetener to get them onside.

We have already seen Ebay do this with Buy.com with a “special rate” for listing.

Now if Ebay are prepared to give a special rate, who is to say why they would not give a “special” placement in search.

The invisibility of “best match” is a concern, and until it is transparent, there is going to be this distrust of Ebay.

Why keep it hidden other than to benefit someone?

Keeping it hidden does not benefit the seller that is for sure.

Keeping it hidden does not benefit the buyer (if it does I cannot figure out a reason). I know they can argue the best listings can get the best sales, but who defines what the “best listings” are and for who’s benefit?

That is an irrelevant argument for the buyer, they just want to buy something based on their criteria, but Ebay have decided to set the criteria, which ultimately has to be in their best interests.

If it were open, then sellers and buyers would know why there is success in some quarters and not others and respond appropriately.

Keeping it hidden so that Ebay can favour corporate clients benefits Ebay, a wonderful sweetener, if that is indeed happening.

“We will give you the best fees and the best placement if you put all of your inventory on Ebay, are you interested?”

This is the only logical reason I can think of for having “Best Match” closed to scrutiny.

Something that is hidden by nature is trying to hide something.

Have you also noticed that DSR’s calculations are hidden…

Now Buys DSR’s sit there at a comfortable 4.8 across the board.

Could it be that DSR ratings are hidden to benefit corporate clients?

Could it be that Best Match algorithm is hidden to benefit corporate clients?

While it is all so hush hush, how will we ever know?

Now if you were trying to bring a big seller online to replace all the small sellers, without alienating those small sellers, how would you do it?

Would you create a system whereby you could do the following:

1. Move out the small sellers that clutter the site with low value items.
2. Give the corporates lower rates.
2. Protect the corporates from buyer discontent with a weighted hidden feedback system.
3. Favour the corporates in searches.

That would work, wouldn’t it?

And remember, the current changes are just the first year of a three year plan according to J. Donahoe (the MD of Ebay).

A three year plan to achieve what exactly?

The corporate selling hub of the internet?

Thoughts?

Mark

[…] News offered eBay Needs To Find A New Set Of Tools To Motivate Sellers In 2009 and a few days later followed up with Some Observations About eBay Trends From An eBay […]

I think EBay sellers need to open up to international buyers as an additional revenue stream. There are many products either wayyy cheaper in the US or just unavailable in places like AU, UK, Canada, etc. Companies like http://www.BongoUS.com have made this process very easy for EBay sellers to utilize.
Their services are totally free for the EBay Seller, but they will fraud screen the international customer and provide them with a US address. This way, as a seller you simply ship your goods domestically to the buyer’s US address and Bongo will handle the rest.

Additionally, Bongo can save them up to 82% off common carrier rates through their consolidation processes. So if they want to buy from a couple different retailers and ship together overseas it’s all good.

Just smart business.


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