eBay Needs to Put Some Skin in the Game

Posted on March 6, 2009. Filed under: eBay | Tags: , , , , |

Ina Steiner of Auctionbytes recently published an article titled eBay CEO John Donahoe at Goldman Sachs Conference and I quote from that article: 

When asked about zero insertion fees, Donahoe said, “One of the historical leanings from eBay is that a little bit of skin in the game from the seller is a really important screening mechanism.”

When asked whether insertion fees could go all the way to zero, he said it would vary by category and country, but, “It won’t go up. It will go down over time. But there’s nothing planned this year in that front. We made the structural changes we needed to on that front last year.”

Donahoe’s comment really is odd considering eBay themselves have no “skin in the game” on their own platform.  What Donahoe is intimating is that “inferior” sellers, such myself, need to pay an insertion fee or else we would end up listing junky stuff on the site.  On the other hand, Diamond sellers don’t pay insertion fees so that must mean that Donahoe thinks the Diamond sellers don’t need to put any skin in the game.  Perhaps that is why some of the Diamond sellers list such things as ink pens and paper clips which obviously eBay considers to be much more of a “quality” listing than the items I sell.

Consider this for a minute.  Some of the items I sell range in price from $200 to $500 but I have none of those items listed on eBay anymore (and except for maybe one or two of the items, no other eBay seller has them listed on the eBay site either).  I have every one of them I possess listed on Amazon.  It is not worth me putting some skin in the game to list those items on eBay.  Even a few cents a month to list them in my eBay store simply isn’t worth it because it is more than just the insertion fee I have to consider.  It takes time to list items on multiple platforms and when I consider that Amazon charges me NO insertion fee then I will certainly list items on Amazon.  Why would I want to spend my time AND MONEY to list on eBay when I can list the same item for free on Amazon? 

Donahoe’s idea of making non-Diamond sellers have some skin in the game actually causes decreased selection on the eBay site and the trend will continue.  Despite what eBay intimates, I am a quality seller who offers outstanding items and the insertion fee is something that I consider when making my decisions about where to list my items.  My items that are limited in nature don’t do well on a fixed price multiple listing.  I have stated this many times before — if only 200 of an item was produced and I list a quantity of 50 at one time on eBay so I can save on insertion fees then I will miss out on sales of the “rare” item because it won’t appear so rare.  So, knowing that this is a rare item in high demand I will list it on Amazon with a quantity of 1 and just keep replacing it when it sells.  That way, too, my competitors don’t see that I sold 50 of them on Amazon unlike eBay where it would be evident that I sold so many of them.

Another quote from the Auctionbytes article:

“We must improve trust on eBay. I am tired of and done with us providing a sub-optimal experience,” said Donahoe. “We made important progress last year, we will continue to make progress this year to improve trust on eBay.”

Donahoe is clearly stating that the poor trust issue on eBay is the fault of the seller since eBay’s main focus last year was to remove fraudulent and poorly performing sellers (you know, the ones who overcharged on shipping for example) from the site.  As a seller who is neither a fraudulent seller or a poorly performing seller, I want to know: When is eBay going to put an end to their policies that actually create mistrust between buyers and sellers?  Specifically, eBay puts policies into place for the sole purpose of increasing their revenue (or preventing a decrease) but which foster mistrust between the buyer and seller.

I’ll give a real example of what I mean.  In my eBay store, I have one item listed for $17.95 and another item listed for $12.95.  For this example, we’ll say they are socks.  Clearly, there is a difference in quality or something other difference which causes one to be priced higher than the other.  I pay more for the $17.95 item so I charge more.  I may have 10 of each item listed in my eBay store but sometimes I put one item out for auction to draw traffic.  For the $17.95 item I start the bidding at $14.99 and for the $12.95 item I start the bidding at $9.99

Last month, I had a buyer win the auction for $9.99 and then immediately (almost within minutes) of the auction ending, the bidder emailed and asked if she could substitute the higher priced item $17.95 for the lower priced item she actually won since, in her words, “they are both socks”.  I politely declined to substitute stating that we don’t make substitutions for a number of reasons.  The buyer, who also happens to be a seller, then sent me a very nasty email and, among other things, demanded that I cancel the bid.

Keep in mind that eBay does not allow bids to be cancelled after the auction ends but eBay has in place a mechanism where the transaction can be cancelled.  But herein lies the problem.  When a transaction is cancelled, eBay refunds the final value fees.  Of course, eBay does not want to issue any refunds so they make it difficult to obtain the refund and eBay’s policy regarding mutual cancellation actually puts the buyer and seller at odds with each other.

One would think that the buyer should have the option of notifying the seller they want to cancel the transaction and the seller could agree or not.  After all, the seller listed the item and the buyer purchased the item and it is now up to the buyer to pay for the item and if they no longer want the item (do not want to pay for their purchase), should the buyer not be the party that should initiate the cancellation? 

eBay does not allow the buyer to initiate a cancellation of the transaction.  Instead, the seller must initiate the cancellation and the buyer must formally confirm the cancellation in order for the seller to get a partial refund of their fees. 

So, what happens if the seller formally initiates a mutual cancellation and the buyer does not agree by formally responding to the cancellation that they agree even though they may have sent an email to the seller asking for a cancellation?  At that point, the buyer can leave negative feedback and the seller has no recourse regarding feedback and the seller has no recourse to get a partial return of the selling fees.  So, what incentive does the seller have to initiate a mutual cancellation versus opening a dispute resolution case where the buyer receives a strike and the seller has recourse if the nonpaying bidder leaves negative feedback?  A nonpaying bidder who asked for a substitution and was denied is not likely to formally agree to a mutual cancellation so the seller is completely at risk of negative feedback and paying fees for a transaction that was invalid if the seller initiates a mutual cancellation.  Why would eBay put the seller in such a position?  Because to do otherwise would make it easier for transactions to be cancelled and thus would lower eBay’s revenue.

If eBay TRULY wanted to increase trust on the site, they could make one very simple change to the mutual cancellation policy: Allow either party to initiate the cancellation of a transaction.  In my case, I would have agreed to a mutual cancellation since that would have meant I would get a return of my final value fees and the buyer could not leave me feedback.  If the buyer formally initiated the cancellation, I would have agreed to it.  But I was not willing to put trust in the buyer and put my reputation (feedback) at risk or risk losing my final value fee refund all for a buyer who had already proven themselves untrustworthy by not paying for the item they won on auction.  It was eBay who put me in the position of having to label the buyer as untrustworthy because of the policy that only the seller could initiate a mutual cancellation.

This is but one of many examples of eBay policies that cause a rift between eBay buyers and sellers.  What is really frustrating is that there are so many very simple solutions that eBay could enact that would create a much better buyer-seller interaction.  Not only would trust on eBay improve, but buyer and seller satisfaction would increase.  And eBay would only have to put forth very very minimal effort to achieve great things.

The problem is that I think eBay is simply too unwilling to give up anything.  The current mutual cancellation policy was created to minimize the refunds eBay would have to give back but in doing so eBay causes sellers to spend more time fighting for refunds that are owed (or those who choose to pay for unsuccessful transactions because they don’t know how to obtain refunds or they don’t have the time to fight for them simply become very frustrated at the process and angry at the nonpaying bidders) and definitely creates unnecessary tension between eBay buyers and sellers.

How about it eBay…. show us you are willing to put some skin in the game — open up the mutual cancellation so that either party, buyer or seller, can initiate the cancellation of the transaction.  After all, what more could you possibly lose than you are not already losing now?  Buyers who are not ultimately going to pay anyway will be much more likely to initiate a mutual cancellation much earlier in the process.  This would decrease the frustration on the part of the seller as they will be able to relist their item much more quickly.  In addition, the seller will not have to spend time harrassing the buyer (which then makes for a very dissatisfied buyer even if the buyer does ultimately pay) to pay or fighting so hard for the refund owed to them by eBay.

There is more than one way for eBay to show they can and will put some skin in the game.  Stop telling us all the great things you have been doing for the community (which obviously has not improved anything for most sellers) and all the great things you plan to do for us in the future.  Instead, SHOW the community that you believe enough in your own platform to take the hit when YOUR CUSTOMERS (buyers) don’t follow through on a transaction.  Stop making the sellers pay again and again, with their time and their money, for your failings to deliver a good quality buyer who will pay in a timely manner for the items they purchase on your platform.   

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6 Responses to “eBay Needs to Put Some Skin in the Game”

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So true. It seems like every step eBay takes to “increase trust” actually does the opposite. Buyers and sellers now have to deal with an increasingly adversarial relationship, which is completely unnecessary.

I recommend listening to the the entire podcast that Ina quotes JD from. It’s very illuminating (if you read between the lines) and only lasts about 35 minutes (you can find the link at Wingo’s blog).

In sum: ebay management has a vision for their overall business as a portpolio: JD only sees the actual ebay marketplace as a large part of it, clearly not the whole.

Listen further and you’ll realize that with ebay, its only going to be their way or the highway-more so in the future than ever before. Sellers are the proles to ebay and it’s never going to change. Knowing that now is the best way to move forward for your business. Use ebay as much as makes sense ($) and that’s that.

I’m even weaning myself off the ebay based blogs. I still read great stuff, like yours, but I’m just done beating my head against ebay’s wall, year after year…

Really good article as usual, Brews. What Dan says is true as I listened to the podcast as well. Nothing is going to change unless the investors demand Donahoe be ousted. As year after year passes, IMO, Ebay will erode into a very small player in the game. Sellers are beyond sick of this stuff and many have moved on. What’s left of Ebay is just good entertainment to watch while eating popcorn as Ebay stumbles and crumbles.

Didn’t have to be this way.

This is a great piece, but as others have said, I think ebay has no intention of changing the course they are on, they are hell bent on it. So we can either adapt to their changes as they come, or walk away.

Wow Brews, excellent as usual. I regret to say that you write too well to waste your time doing so about eBay. Write a book and I will buy it. Nonetheless, I will join you in this wasted discourse.

It is said that business is business and to not take things personally, but that’s so much easier said than done when it comes to ebay. I’ve poured my heart into it since ’98, but feel dirty at having done so. I knew that there were some unscrupulous people out there in the world, but ebay possesses an astronomical gravitational pull for them in its worldwide customer base. Alas, eBay management itself is run by representatives of its customer base and you know by the blatantly stupid comments it makes about its future. So, why should we be surprised that eBay’s decisions are so far away from sellers’ interests. eBay’s policies condone poor buyer behavior and that is a result of it’s continuing effort to keep and attract more of them. I am not saying that Amazon does not have a share of poor buyers, but its policies are not set to attract the scum of the earth and then call them good, as does eBay’s. It all seems so simple to me. You can’t have trust without meaningful consequences on both sides of a transaction. This is the internet you fools. The customer is NOT always right, especially on eBay where buyers have grown ten feet tall protected by anonymity and encouraged by a lack of basic morals. I rack my head wondering why eBay is bent on such a self-defeating course. I can only surmise that eBay is only interested in generating revenue from advertising and that the revenue it generates from the sellers is inconsequential. What a contradiction. Bottom line I guess…”let’s milk it ’till its dry and move on”.

I have had jobs in the civil service, military, and in corporate America. In all cases, I’ve watched management grow clueless as it moves over the years further away from where the real work gets done. The common factor amongst them, similarly affecting eBay management, is typically human nature’s worst characteristic, e.g. greed; evidence the condition of the current stock market and banking industry. Signs of the market’s demise have been looming for years (variable-rate mortgages and zero-percent financing). For example, the SEC had ample evidence that Bernie Madhoff was a crook, but because he represented so many “important rich people”, it looked the other way. Rich people were making money so how could anything really be wrong. The SEC could easily do so because legally the federal government cannot be held financially accountable for its actions. In its own way, eBay too is looking the other way though bombarded daily with specific examples of the strife we sellers are suffering as a result of its policies. Similarly, who could afford to fight ebay and win? We made ebay the monster it is and so we now have to share the credit.

eBay’s demise is certain and blaming the economy is a cop-out. We should stop wasting time trying to delay the demise because eBay is not listening. For eBay management and stock holders (the rich people) there is not enough in common with its sellers (the common folks) for effective communication to take place. We speak two different languages. It’s sad because eBay at one time had so much promise for the average American.

I couldn’t have stated it better.
BONANZLE is my New Home :o)

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