American Technology Research analyst Mark Mahaney hosted a call with eBay PowerSellers to discuss their reactions to eBay's recent price changes. Here's the main body of his note (permission received):
We sponsored a conference call with several eBay PowerSellers. They were 1) Randy Smythe, President of Glacier Bay Entertainment, a top DVD seller on eBay. Glacier Bay generates approximately $5MM in annual sales, with 95% of that on eBay. Glacier Bay is also the #2 PowerSeller on eBay, based on feedback ratings. 2) Mark Fitzgerald and John Kuhlmann, COO and CFO of Grapevinehill, Inc, a top apparel seller on eBay. Grapevinehill is the leading seller of footwear on eBay, with approximately $5MM in annual sales on eBay. Grapevinehill is also the #30 PowerSeller on eBay, based on feedback ratings. 3) John Weiber, President of Laptopbroker, a top computer seller on eBay. Laptopbroker generates approximately $1.5MM in annual sales via eBay. And 4) Scot Wingo, CEO of ChannelAdvisor. ChannelAdvisor provides auction and market place management software and services to approximately 3,000 sellers on eBay. This seller base accounts for approximately $500MM in annualized gross merchandise volume (GMV) on eBay, or 3% of eBay's total U.S. GMV.
Here are our take-aways:
1. There appears to be no PowerSeller interest in leaving eBay, but there is interest in allocating incremental investment dollars to other channels, specifically sellers' own Websites. A key theme was that sellers are diversifying away from eBay in terms of using search engines, comparison shopping engines, other merchant sites like Amazon (AMZN, $36.03, Hold) and Overstock (OSTK, $54.92, NR), and especially, sellers' own Websites. But none of the PowerSellers were actually considering reducing their existing commitment to eBay. One PowerSeller said he did not see any of the top 1% of eBay sellers leaving the platform. Another PowerSeller said he expected that eBay would always account for a majority of his sales. The diversification had more to do with using incremental investment dollars. One PowerSeller described 2005 as a transition year. Part of the concern was that the competitive environment of eBay created low final selling prices. One seller estimated that ASPs on his own Website were 20% higher than on eBay. Another seller put it this way -- eBay has struggled to deliver high-end customers.
2. There appears to be little interest in the reported eBay sellers' strike. There have been reports of a potential eBay sellers strike, coinciding with the implementation of the new fees on February 18th. eBay management was asked about this at last week's Analyst Day and stated they were unsure of what would happen. Of the different questions posed to the PowerSellers during the conference call, this one brought the surest consensus. None of these PowerSellers planned to participate in the strike. None of them appeared to take the idea seriously.
3. PowerSellers are concerned about recent fee increases and are reacting to them by reducing their usage of Buy-It-Now and Gallery features. Not surprisingly, the PowerSellers had a uniformly negative reaction to the soon-to-be-implemented fee increases. One PowerSeller stated that the specific Buy It Now and Gallery Feature price changes would increase his expenses by $50,000 annually. Accordingly, he was cutting back on his usage of these features.
4. PowerSellers have seen a recent modest increase in eBay's responsiveness, but are still concerned over what they view as limited company support for sellers. Asked whether some of eBay's recent initiatives -- such as a limited fees rollback or live customer support for eBay Stores owners -- marked an increased responsiveness from the company, the answers were mixed. One PowerSeller -- the one with the highest feedback rating -appeared comfortable with the level of company responsiveness. But other sellers indicated that eBay's responsiveness has consistently been limited, with little signs of change. These sellers also complained that the eBay customer service representatives who contacted them had little to offer in terms of new suggestions.
5. There appear to be increasing concerns over the incidence of seller fraud on eBay. PowerSellers were careful to distinguish between buyer fraud (e.g. disappearing high-bidders, fraudulent checks) and seller fraud (e.g. fraudulent or incorrectly described products). The PowerSellers appeared unanimous in saying that seller fraud was a bigger problem than buyer fraud in that it undermined the integrity of the trading platform.
6. Reliance on PayPal as a payments mechanism is very high among these sellers -- and own Websites could be an incremental new revenue source for PayPal -- but the reliance levels are coming down. All of the PowerSellers were extensive users of PayPal. And all considered it a given that PayPal would be integrated into their own Websites -- a sign of the significant potential for eBay Merchant Services, or PayPal off eBay. At the same time, the PowerSellers indicated that their reliance on PayPal has been declining. One stated that since the PayPal system outages in the Fall, the seller had been promoting more direct credit card usage. Another stated that 80% of his sales were conducted via PayPal, a very high level, but down from 100% in the past.
Quick comment: Genuinely useful research. Anecdotal, but names names and has impactful content.