Diamond Powersellers, Coupons, and the Future of eBay

Posted on November 2, 2008. Filed under: eBay | Tags: , , , , , |

According to the Omidyar.net website, Pierre Omidyar launched eBay on Labor Day 1995 as an experiment in how a level playing field would affect the efficiency of a marketplace. (Click HERE ).  Even as late as April 2008, Pierre was speaking about the level playing field on ebay.  (Click HERE )
 

Some people might argue that when eBay created the Powerseller program, the level playing field ended but I would disagree.  The Powerseller program was designed to provide benefits to sellers based on their current selling activity on eBay, not based on any activity that was outside of eBay.   Up until this year, there were little or no rewards offered to any seller who was recognized as an eBay Powerseller.  It is only this year that some tangible benefits were offered to Powersellers in the form of greater PayPal protections and also protections from receiving negative feedback within the first seven days after a transaction, among other things.  Powersellers also now have the potential to receive discounts on their selling fees based on their level of customer satisfaction as determined by Detailed Seller Ratings (DSRs).  But, again, these rewards and benefits accrue to sellers based on their current eBay activity.

 

This year, for the first time that we are aware, eBay began rewarding sellers on eBay for their activity outside of eBay and this, I believe, was the end to Pierre’s level playing field experiment.  eBay had not intended for the information to become public that they were offering fee discounts to entice large non-eBay sellers to begin doing business on the eBay platform but the information did get out to the public nonetheless.

 

The first question that comes to my mind is – Why was there not any current businesses on eBay that deserved the kind of fee discounts that eBay offered to non-eBay businesses?  I think there are a few reasons.  First is that eBay would be likely to resist offering discounts to anyone already selling on the eBay platform because they already had those sellers “on the hook.”  Look at this way – if a business were paying rent in a mall, the mall owners are not going to offer the current store owner a discount on their rent whereas they might offer a new tennant a reduced rate for 6 months or the first month free rent, for example, as an inducement to get them to move in.  Once the “new” tennant has moved in, the mall owner knows they are likely to stay for awhile.  Also, non-eBay businesses who are well-established in the online market would not consider doing business on eBay without any kind of inducement because the eBay selling fees are very expensive and because it is very costly for any business to service the eBay customer who is the most demanding internet customer. 

 

The next question that comes to my mind is – Why would eBay try to hide the fact that they were offering inducements to bring large online retailers to the site and what does that say about the company’s ethics?  Of course, eBay knew that the millions of small sellers who had helped build the eBay community would not be happy to hear that the level playing field experiment had come to an end so eBay made the choice not to tell them.  And when news unexpectedly got out about the first “special deal” with Buy.com, eBay hastily announced the creation of a new Diamond Seller Powerseller program after the fact as a way to try and defuse the situation.  But, as of today, there is no Diamond Level Powerseller status mentionned in all the Powerseller information on the eBay site (see below all the current Powerseller levels and notice that Diamond does not appear on the list). 

 

The last question that comes to my mind is – Will the new “Diamond” Powersellers eBay is bringing on board be able to manage their eBay business successfully and will bringing these large online sellers to eBay be worth the loss of the thousands of sellers who will willingly or unwillingly leave the platform as a result? 

 

To answer the last question, one would need to look at those specific businesses eBay has courted thus far:

 
 
Buy –  Click HERE
 
Shoplet – Click HERE
 
Toolup – Click HERE
 
 

It is interesting that all three of these businesses are 100% online retailers, no brick and mortar outlets.  Several points about the sellers being online retailers exclusively:

 

1. As a successful online retailer, these companies are experienced shippers who know how to handle a mail-order business in contrast to some of the other large brick-and-mortar retailers who tried selling on eBay and failed miserably. 

 

2. As a successful online retailer, these sellers will not experience the same kind of “manufacturer” issues that other eBay sellers typically experience.  Many manufacturers do not want their items sold on eBay and will often times refuse to sell their items to businesses who plan on selling on eBay.  But these three well-established businesses, with their good reputations and buying power, will likely not have the same manufacturer restrictions as many other sellers might.

 

3. Because these new Diamond sellers are successful online sellers in other venues (their own websites and Amazon), they have something to which they can compare their “eBay selling experience”.  And these online businesses will discover that the real cost of doing business on eBay is incredibly high.  eBay customers ask a great many questions before purchasing, have lots of “special requests”, and have many strange complaints after the fact.  A seller who has only sold on eBay might not realize how demanding eBay customers are but those who have experience selling elsewhere will realize the difference right away.

 

Given eBay’s reputation for being a “cheap” venue, one where items are discounted more heavily than other venues, how will these new Diamond Powersellers be able to encourage buyers to purchase from them on eBay rather than on the other venues where they also sell, such as Amazon and on their own websites?  Well, there is where eBay is going to help — the many coupons that eBay is issuing to buyers, such as 10% off purchase, actually helps to lower the price on eBay for the items that buyers want to purchase from these large online sellers.  But, who really pays for these coupons?  The small eBay seller, with the high fees they are assessed, are actually helping to subsidize the large sellers who are receiving selling fee discounts and who are able to sell their items on eBay because of the coupons issued by eBay.  

I understand why eBay is issuing so many coupons at this time.  The coupons are absolutely essential to support these large online retailers courted by eBay.  Most buyers would choose to purchase an item on Amazon or on a seller’s website, rather than on eBay, if the price were the same.  The “advertised” price on eBay may be the same but the eBay coupons make the price on eBay lower.  My question is – How long will eBay be able to continue issuing these coupons which are subsidized by the higher selling fees charged to the small sellers?  And what happens when the pool of small sellers is not sufficient enough to keep the cycle of coupons going?  eBay is artificially lowering the price of items on eBay by offering coupons to buyers but offering coupons isn’t going to help improve eBay’s reputation.  And once the coupons are gone, the buyers are gone as well.  Once the price is the same again on eBay versus Amazon and independent retail websites, the buyers will choose to buy elsewhere.

I find it rather odd that eBay seems to think they need to focus so much on their supply problem – they are bringing on board several large online sellers with inducements and they have created their new “In Demand” program to entice large Powersellers to offer merchandise that eBay says is short on supply.  It is clear, by their actions, that eBay thinks there is an oversupply of some items in the clothing, shoes, and accessories category and eBay is pretty much abandoning the collectibles categories, especially unique items, in favor of increasing their supply of mass market produced items.  But, without the constant flow of coupons to create a lower priced item, buyers really have no incentive to purchase these type of items from eBay that are so readily available elsewhere.  It will be interesting to take a look at eBay a few years down the road to see how many of these “Diamond” Powersellers are still selling on eBay and to see how eBay ultimately defines itself.  

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13 Responses to “Diamond Powersellers, Coupons, and the Future of eBay”

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Hell hath no fury like that of a buyer who was unable to process their coupon through checkout or did not read all the terms and conditions.

eBay really have shot themselves in the foot with this…Why oh Why would eBay want these Diamond guys when the very same items are being sold already on eBay by fee paying sellers ???

Make no sense at all …but that is eBay circa 2004>

I don’t even think these so called privileged few will even be on eBay selling this time next year & of course the damage to the small seller will have already been done; sadly many will be put out of business due to the new ebay

eBay have Very poor business methods & terrible ETHICS

Great article but I disagree with a couple of key assumptions.

1) “And once the coupons are gone, the buyers are gone as well. Once the price is the same again on eBay versus Amazon and independent retail websites, the buyers will choose to buy elsewhere.”

What information are you using to make this assumption? I think it’s flawed.

Think about all of the manufacturer coupons in your Sunday paper. They’re there because the company hopes that the $2 off might entice you to buy Iams cat food, for instance, and your cat will be so happy that you go buy more of it later.

Why can’t we assume the same – that the coupon might entice somebody to buy on eBay, and when they have a dandy experience, shopping there is now embedded in that buyer’s mind as a nice place to shop?

I say, bring on the coupons! Give shoppers a reason to browse the site!

2) Re: “eBay customers ask a great many questions before purchasing, have lots of “special requests”, and have many strange complaints after the fact.” –

That’s just too sweeping of a generalization about the behavior of millions of individuals.

As a very long-time eBayer (10 years) and pretty high volume for a solo person with no employees, I can tell you that this has NOT been my experience.

Fact is, it’s easier on eBay to get an answer from the business owner than it is, say, to try to contact somebody at a large company.

On eBay, the buyer will probably be able to contact the person who has handled the product, vs an employee in India who is answering questions based upon what is written in the catalog.

To be clear, I’m not thrilled with the idea of Diamond sellers generally. But I won’t automatically assume that it’s definitely going to be a bad thing. If they can deliver a great shopper experience at a tempting price, it might bring some new customers aboard.

Similarly, if they’re offering their products at full price, this might change the perception that eBay’s strictly a bargain basement.

Donna, pet owners NEED to purchase cat food so a coupon could entice them to try a brand they had never tried before and then the next time they MUST purchase cat food they might continue to buy the same brand, even without a coupon.

But when coupons are offered to consumers regularly, and especially for items that are not necessities then the buyer is conditionned to wait for the coupon. For example, think of Chuck E Cheese. They issue coupons ALL the time. Anytime I considered taking my kids to Chuck E Cheese when they were younger, we ALWAYS searched for a coupon before we went and if we could not locate one then we went to Cici’s Pizza instead. Of course, if it were a special occasion like a birthday then the coupon didn’t matter but all other times, when the trip to Chuck E Cheese was not “necessary”, it mattered.

And, back to your example of coupons in the paper, think about cereal coupons. Cereal is expensive and I know that I ALWAYS look for coupons and specials. I may buy one brand of cereal this time because I have a coupon and then a different brand of cereal next time because I have a coupon. No coupon for that particular cereal then no sale. Granted, not everybody will wait for a Chuck E Cheese coupon or for a cereal coupon but I guarantee you that most parents are conditionned to look for the Chuck E Cheese coupon and cereal coupons and will wait for those coupons.

Regarding contact by eBay buyers, you made my point for me exactly. Because buyers on eBay feel that they can get answers straight from the horses’s mouth, they are MORE LIKELY to ask the question in the first place rather than reading the information in the listing. eBay buyers often like buying from smaller sellers (rather than the large Diamond sellers) because they can get their questions answered.

My experience from a 10+ year eBay seller (and owner of an ecommerce site for 8+ years and a seller on Amazon this year) is that buyers on all other venues are much less likely to even ask the question in the first place.

I am an eBay education specialist and business consultant and ALL of the eBay sellers I assist say the same thing – buyers on eBay are more demanding and take more time to service than any other venue. Time is money. When it takes more time to service customers then the money a seller makes is less for the time invested on eBay than on another venue.

If eBay would focus on bringing in the buyers, any supply problems would solve themselves.

I totally agree with Brews concerning the coupons. I am not loyal products such as cereal, juice boxes, bread…. my kids know if it isn’t on sale don’t ask. For products I am picky about if it isn’t on sale I don’t buy. The animals eat whatever is cheapest just like my kids LOL.

I like KFC but unless I have a really good coupon I do not buy it. This applies to Round Table pizza as well.

I don’t have any experience selling other than eBay, but I do buying and I can say when I buy from any other site such as bath & body works, macy’s, Amazon, oriental trading company ….. I do not ask questions nor do I attempt to negotiate on price or shipping fees, which I do on eBay. Also many eBay buyers email me with questions about the product, offers on my items, and shipping cost/service used. I doubt any of these buyers do this on other shopping sites just like I don’t.

Example: I woke up to a question asking if I would ship two items first class for 2 dollars rather than the priority 4.60 flat that I charge. These items each are already 8 dollars below retail and combined and packaged would exceed the weight allowed for first class. I do not see the diamond powersellers accommodating such absurd request any more than I will.

The time involved in servicing eBay buyers is well beyond the time it would involve on any other shopping site, because these absurdities are not a part of the experience of those shoppers on those sites. The cost will increase substantially for these diamond sellers as they continue to transact on eBay. On top of the time burden they also face the reputation liabilities of the feedback system, which can be very costly as we all know. Reputation on eBay does significantly impact the sellers success, and many buyers do not realize they are buying from Buy.com when they view their feedback- they see another seller with an insane number of negative and neutral feedback and over time this will take a toll on buys success.

A seller with a good reputation is more likely to attract good customers and is able to command higher prices for their products. As time goes on buy will have to compete against sellers with good records to maintain their pricing otherwise they will be forced to drop their prices and it will become a losing proposition to sell on eBay.

The anger – justifiable anger – of eBay users relative to buys presence in the marketplace will result in negative and costly reputation issues with Buy.Com off eBay. I don’t know of any seller who will ever purchase from buy.com now- I certainly won’t.

“Most buyers would choose to purchase an item on Amazon or on a seller’s website, rather than on eBay, if the price were the same.”

Where did that gem come from? Some sellers might like to think that’s the case but I can assure it’s not. Trying to get repeat buyers to your web site even if cheaper is like pulling teeth.

eBay is a business and will do what they think is best for the shareholders. If people really think eBay cares about any individual seller they’re living in a dream. You’re a tiny statistic in their monster company. you might think you’re important but you’re not. Some people seriously need a reality check it seems.

Why people struggle so hard on ebay in feeding this monster is beyond me. I moved over to my own web site two years ago and haven’t looked back. Far more profit, no ebay baggage, rules and changes to put up with. I’m working less and making more money now, go figure.

ebay has had it’s best days, nowadays it’s little more than the trash can of the online world. Over priced junk, seconds, store returns, tax dodgers, scams, bad sellers and everything else along the same lines. That’s not what I think, that’s the general view of the regular guy in the street.

Raise your business profile, get your own site and get the hell off eBay.

@Richie

Why people struggle so hard on ebay in feeding this monster is beyond me. I moved over to my own web site two years ago and haven’t looked back. Far more profit, no ebay baggage, rules and changes to put up with. I’m working less and making more money now, go figure.

I do believe this was Brews point

On what do you base your claim that the coupons are aimed at any specific type of seller or merchandise. Facts man facts, not rumors and supposition.

While I agree that there is a glut of some new items on eBay, I would disagree that eBay is abandoning collectibles. It just is that due to their very nature, you don’t have issues with a “glut” of all the same collectibles, so no need to rebalanced the field.

Personally what I think eBay should do to fix the problem is divide eBay into auctions & fixed price.

#1. Get rid of AUCTION categories for new, commodity type items, like most clothing, media, etc.

#2. Add many of the ProStores features to eBay stores, get rid of prostores, and have the sellers move their new commodity type items to eBay stores.

#3. Keep auctions for your real collectibles / antiques & rare / hard to find new items.

#4. Possibly implement rules regarding reproductions and such as ONLY allowed in eBay stores, but NOT in auction format.

#5. Depending on what a customer searches for will depend on what shows up, ie if they search for an antique / collectible item, than a listing of ALL related auctions would show u, while if they searched for the new dvd / book, than a list of the TOP Buy It Now’s would show up, with a prominent link at the top if you wanted to see ALL of them.

#6. Still allow low Sell Through Rate antiques / collectibles in stores.

#7. The FVF fee charged for a sale either in auction / Fixed Price Store would be BASED on whether the buyer found the item THROUGH eBay or through the sellers own advertising.

This would accomplish several things. It would remove the current cluttered look of the eBay site. It would retain auctions for desirable low quantity / unknown value items, where auctions excel, and use Buy It Nows mainly for new commodity type items where value is known & for low demand antiques/collectibles where Fixed Price excels.

By adding the Ecommerce benefits of ProStores to eBay stores would enable sellers to leverage the eBay market place, while STILL running their own ecommerce site [ie the NEW eBay Stores/Prostores], since shopping carts, coupons, etc have been added. Since the FVF fee is BASED on who attracted the buyer gives the financial enticement needed for sellers to no longer see eBay as just a stepping stone to their own website.

Just my 2 cents worth of advise.

The more the economy sucks, the more powerful coupons will become.

Thanks, Great information. I really enjoyed it.

This post was removed by ebay from ebay forums on 11/7/2008 the original poster is a hero!! Everyone is complaining, this poster told us exactly what is wrong with the new search.
THIS IS A MUST READ!!!
Are you experiencing slow sales?, look at your item views, they are
not being viewed. The ebay policy which was suppose to give the
buyer a good experience and reward you for giving good service and
free shipping, is in conflict with the new search. Have you worked
hard to keep up your dsr’s and positive feedback? It does not matter
with the new search, Is your search standing raised? It does not
matter. Did you offer free shipping to get a better search standing ,
It does not matter. Here is the cold hard truth. The new search
rewards sellers with lower feedback, lower dsr’s, and policy
violations. Here is how it is. Those sellers are pricing their items
dirt cheap, when they do so, they sell more. They are placed as the
first item at the top of the page if they sell more, no matter if it
is bad quality, bad customer service, bad shipping , or whatever,
they get top search because they sell more. So ebay telling you that
you have a raised search is not true, the truth is if your cheaper
and I mean a lot cheaper, you are number one in the search standing in ebays eyes. If your
selling a better quality item you are cheated. I urge you to
COMPLAIN TO EBAY. Contact ebay customer service and complain
today!!! Contact the BBB in San Jose CA. This is absolutely true I
have had several people investigate, I JUST SPOKE WITH EBAY, THE REP
AGREED IT WAS WRONG AND THAT IT WAS VERY UNFAIR, THE REP CHECKED
ACCOUNTS AND AGREED WITH ME AND SAID SHE WOULD PASS IT ALONG. IF
THEY ARE NOT LISTENING TO THOUSANDS OF SELLERS, THEY ARE NOT GOING TO
LISTEN TO ONE REP. MAKE A COMPLAINT! DO IT! IF YOU DO NOT, NOTHING WILL
CHANGE. This was all planned, it is a scheme to get you to list
more, list with free shipping which raised your FVF, didn’t it. It
all did not matter, it increased ebays revenue, and your sales have
nose dived. I fell into the trap I have 900 listings with free
shipping, and my sales are way below what they should be. I looked at
my active listings no views.

The seller posting this is completely right.
We also recommend you contact the District Attorney’s office in the county where the business is located to file a complaint. Many local district attorneys, through consumer fraud units, prosecute fraudulent practices in their communities. You may contact the Santa Clara County District Attorney’s office at the following:

County of Santa Clara
Office of the District Attorney
70 West Hedding Street, West Wing
San Jose, California 95110
Telephone: (408) 299-7400
E-mail: webmaster@da.co.santa-clara.ca.us
Web site: http://www.sccgov.org/portal/site/da/

In addition, we suggest that you contact the California Department of Justice, Office of the Attorney General (AG). The AG’s office establishes and operates projects and programs to protect consumers from fraudulent, unfair, and illegal activities that victimize consumers. The AG enforces consumer laws by seeking injunctions and civil penalties and has jurisdiction to stop a particular business practice and seek penalties for violations of the law. For more information, please visit the AG’s Web site at http://www.caag.state.ca.us, or contact the AG directly at the following:

California Department of Justice
Office of the Attorney General
PO Box 944255
Sacramento, CA 94244-2550
Toll free: (800) 952-5225 (in California)
Telephone: (916) 322-3360
Web site: http://www.caag.state.ca.us

You may use the following link to the California AG’s office to file a complaint:
http://ag.ca.gov/contact/complaint_form.php?cmplt=CL

We hope this information is helpful.


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