Is eBay's Strategy Working? 28 comments
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In previous posts on this blog and in the press, I'm on the record pointing out many eBay (EBAY) issues that we see with DSRs, BestMatch/Finding, fraud, eBay's overall strategy, how they treat sellers, etc. Like everyone in the ecosystem I am very concerned about the future of eBay.
Thursday, we saw an interesting datapoint I wanted to share. Now it's one datapoint and I realize that, but it is a significant datapoint and could be an early signal that eBay's changes are working.
eBay: A mile wide and an inch deep.
For 8yrs+, ChannelAdvisor has been helping sellers of all sizes on eBay and we quickly learned that the eBay sweet-spot for sellers of any size is for wide (lots of SKUs), but not deep (lots of quantity of a single item). Back in the day (2001-2007), we worked with eBay to bring some manufacturers and retailers on the site and also with larger powersellers to test the depth of the platform. We've had IBM sell hundreds of laptops, Motorola (MOT) sell hundreds of handsets, and shoe sellers sell hundreds of great-priced shoes, etc. While that sounds interesting, it's usually just a blip out of the total inventory available.
In fact most eBay sellers of scale ($2m/yr+) have to run a wholesale business as they buy in such large lots, they can only sell a small % on eBay so they end up wholesaling the rest. Large manufacturers and retailers turn to 'jobbers' or liquidators to move volume. Some of that product comes to eBay, but the bulk doesn't so there's a huge opportunity GMV out there of 'deep sku discounts'.
Companies like Overstock (OSTK) and smartbargains and liquidation.com fill some of the gaps there as well.
In retailer slang, it became well known that eBay is a mile wide and an inch deep.
Houston, we have a problem?!
Ok, back to today (December 12, 2008). 24x7x365 at ChannelAdvisor we have 2-3 people on-call watching our production systems. During the holidays we effectively double/triple that staff. Aside from the obvious benefits from doing this, we are also able to see unusual trends and monitor them and react if needed.
Thursday night around 6pm (start of ecomm prime-time), we started getting some massive alerts from our systems that there was some unusual volume. One of our folks dug in and figured out what it was. We had a single eBay listing that was selling at a rate of one every 5-7 seconds on average, but at peak we were seeing several per second.
The system was keeping up, but it was actually causing some delays in the eBay servers (we were able to spread this around and avoid any latency).
eBay - no longer an inch deep?
It turns out that we have a customer, webbestdeals, that had an item selected by eBay for their new deal of the day program (you can read more about it here - clear your cookies if you don't see it). The item is a Logitech Harmony Advanced remote contorl - these are pretty popular and the low price on the internet is $40-50. This seller has it with free shipping for $29.99 - a SICK DEAL! (In fact, I believe the listing was hit on many of the popular sickdeal/fatwallet type sites as well).
As of this writing they've sold over 6000 of these and are on pace to hit 9-10k easily. At 6000 by $30 that's a whopping $180k in a listing. Sure there are cars and stuff that have achieved that, but this is 6000, $30 transactions in a 24hr period. click on 'purchases' if you don't believe me!
So while this is one datapoint, it is interesting to think about the implications. As we enter this tough economic climate, I'm sure there will be a LOT of inventory that needs to be liquidated. Historically a small % of this has made it to eBay. Imagine if eBay could take this model and scale it. There could be some pretty big opportunities out there with sellers of any size (webbestdeals is titanium PS, but not a 'diamond'/brand) that could bring some deep gmv to the 'new, deeper, eBay.'
A word of caution to my Wall St. friends
This reminded me that many of the analysts on Wall St. still try to calculate what's going to happen at eBay based on listings data. They frequently go to the browse all category page and count the listings. Then they look at completed listings to get an idea of conversions. In most of these listings historically the quantity is 1 or close it (dutch auctions, fp7 and others allow multi-quantity listings, but they were rare).
Well FP30 totally ruins that model. First of all you now have lots of 30-day listings out there with more and more quantity 'hidden' behind them. Take the example above. That would have probably been 9000 listings, now it's one listing, quant=9000.
Also, the conversion data is all wacky now too. The reason why is the fp30 doesn't show up in completed listings until it's life is over or it is sold out. So in the above example, you could have 30 days (you wouldn't 'see' until jan) before this listing shows in completed listings. Also, it only shows as 'one sold completed item' in completed search.
To see each transaction, you'd have to dig into the listing and get into 'completed sales'.
The bottom line is eBay is driving FP30 adoption HARD by increasing the mix of fp30 in search results (50% in most cases) and thus there are a material number of fp30's out there with a material quantity behind them and the old listing-count scheme is largely blind to all this activity.
In conclusion...
Yes it's one item and one datapoint, but I have to say I'm surprised and impressed that we're finally seeing eBay address the 'depth' problem. eBay Strategies readers, what are your thoughts? One-time anomaly, glimmer of hope, turnaround is working or rearranging deckchairs on the Titanic?
Disclosure: Author is long Google and Amazon.
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This article has 28 comments:
I'm not saying that there wasn't some changes needed to get some of the worst sellers off or monitered butthey used an axe where a scalpal & some sort of review system before the cut happened .. as can be seen in the new time magazine artical Meg opted to cut customer service to fatten the bottom line for the stock holders .. HUH?? eBay has no inventory, no inventory control or anything for sale but space!! Perhaps had they ventured down the avenue of making their sellers happy they would have had a better out come with sellers staying for being happy like the old days instead of sellings leaving because they felt so beaten & un appreciated .. In the end ever dollar that passes through John Donahoes hand or Meg Whitmans hand is there from a seller not the stock holders .. AK
You can keep "whining" about how small sellers are "whining" but the public sees Ebay as callous and ignorant and cruel! What happened really happened and continues to happen and you can't simply turn around and say "its just business" - in the end the buying public will judge Ebay - not the analysts and not the number crunchers!
He goes back to eBay for further purchases.
What happens when an eBay buyer buys an item from a mega seller and is satisfied with it?
He goes to the seller's website for further purchases. (Look at a company like buy.com which has hundreds of thousands of listings on eBay--total costs to the customer are cheaper at the buy.com site than eBay).
They are circling the bowl. It is much more valuable to be highly compelling to a few than marginally compelling to many......they can barely do that.
Everyone keeps talking sh*t and throwing around business jargon that the average person has little understanding of. They do though understand that the supposed retirement investments that "The Big Boys" sold, in a manner that was once reserved for snake oil have lost approximately a third of the value that they showed last year.
We as a society deparately need to return to simpler people oriented values. We need to relearn the value of hard work and to approach work matters in a less greed driven manner.
America has very little real industry left. Our Automakers are poised to go belly up. These supposed leaders of business have acted out in the realm of fantasy believing that this is the same America as it was at the end of WW2. They have operated in a very short sighted manner, by outsourcing the very jobs that would have paid for the American cars and mortgages. I fail to see any real moralistic differences in how John Donahoe approached his stewardship of Ebay. Meg Whitman and the supposed beloved Pierre were on board with the changes. They rolled out BEORE Meg retired.
I had considered selling on Ebay. I chose not to, because their were far too many risks involved and no recourses open to me if a problem occured.I have a degree in business. I was able to access things properly. I am by and large against the use of jargon. I believe that ti is very important to be understood by as large a range of people as possible. It is far too easy to disguise reality and far too easy to give numbers any sort of appearance that you would like the public to believe.
Walmart is doing exceptionally well, all things considered. Ebay should, by any stretch of the imagination, growing by leaps and bounds within our depressed economy.
I still buy an occasional item on Ebay, but have noticed that the "opening bids" continue to spiral upwards. I find it to be aggravating to have to click out of Best Match ALL THE TIME.
I don't need to have a reminder about leaving honest feedback. Had Ebay been so concerned about my "buyer experiance" as they profess to be, the rude pigs that I fought with last year would no longer be on the site. They would have also offered some non automated responses to my concerns. If they were so concerned about proper customer care the 1-888 Paypal call in center would have customer service reps who were fully capable of understanding the language that I speak. I would be given real answers and not be forced to incur the costs of making toll calls in order to speak to someone who fully understands my language and to also aid me in proper documentation of said conversations.
I also don't really need the continual expert commentary, again couched in jargon terminology. Regardless of however the "experts" choose to spin a story the proof will be, as it always has, in the pudding.
Again, check out the stock market, the chickens are coming home to roost. If it gets REALLY, REALLY bad has anyone read census reports about respective populations of America compared to China? HUGE mistakes have been made.
How can a small seller control how fast the USPS or UPS is going to deliver your package but yet the seller is held accountable for their speed & also if you strickly use the eBay shipping calculator you will get booted for excessive shipping fees or get just 4's which eBay says is GOOD but a straight 4 out of 5 will get your account suspended ..
I can show you 1 seller, a single mom out of the midwest that offered only free shipping that has 100% feedback that got booted for shipping cost?? Now there's a quirk when free shipping can get you booted for excessive shipping cost .. It's because eBay doesn't explain the DSR system to buyers, eBays official word on the matter is that it is up to seller to educate our buyers?? that is from the GURU himself Griff .. So sellers litterally have to beg for feedback & explain how it works .. 5 is for excellent goes beyond what the sellers needs to do, 4 is for very good seller, 3 is for average, 2 is for could have done better & 1 is for POOR service ... But the rub is if you get straight 4's which is VERY GOOD, You will have your account suspended .. it was if you went below 4.3 on any one of the 4 categories you had your accout suspended, When Megs seller account went down to 4.1 they dropped the limit from 4.3 to 4.1 ..
there are so many faults with this system it would take pages to tell them all & in seller central, the feedback board & soap box on the ebay boards there is nearly800 pages of complaints from GOOD sellers done dirty by this system .. Like I have been saying a seller with 100% feedback & a DSR of 4.9-5.0 for item as described can't be all bad ..
so you know how many are now gone, DSR watch says that 5%-10% fall below the 4.1 line so figure safely 5% of 1.3 million sellers have gotten the ax .. Those are mostly small sellers who are or were also buyers on the site that will not return ..
Still yet a single mother that is booted from the site is not a beggar or looking for something extra, she is somebody looking to make an honest living & was following the rules as presented .. eBay hyped itself as a level paying field? now they should live up to the notion!! Allan Kraig
already uses the ProPay service on their own website Propay requires
a separate account for the service if used in the marketplace. The
Propay service has an annual fee so the incentive to open a separate
account to use in the marketplace compounded by Propay's lack of brand awareness in the marketplace deters sellers who can offer the
service from doing so.
eBay has used couponing to raise the demand of the use of the PayPal
service and as a result of both the couponing and the fear tactic eBay employs, even those mid size sellers who have a "choice" must
offer the PayPal service to do business on eBay if they intend to be
optimally productive. eBay Inc. established a collaboration with its various subsidiaries to share account information of all eBay and/or the users of eBay Inc.'s various subsidiary's and is using this information to target consumers of the eBay marketplace who did not use the PayPal service, but instead had paid with cashier's check or money orders, with the seduction of discounts through these coupons to encourage the use of PayPal. The coupons are only good if the purchase is paid for through the PayPal service. This activity is a fact that eBay itself has readily admitted. Their doing so effectively coerces the marketplace users to use eBay Inc.'s subsidiary PayPal's payment service.
eBay deliberately discourages the use of other payment methods in
its checkout by issuing a warning that the buyer does not have
protection if they use a service other than PayPal when the buyer
chooses an option that is not PayPal. This message is absent when
PayPal is the chosen payment method. Of course to tell anyone who
backs up their purchase with their credit or debit card as a credit
card they have no protection is false, because they can do a
chargeback with their credit service if something should go wrong.
In January eBay will implement the banning of 3rd party checkout
services forcing the sellers who do offer credit card payments to
use the eBay checkout increasing the eyes of marketplace buyer to
this warning discouraging the use of the other payment services.
With the integration of merchant services used by marketplace
sellers they are limiting the sellers service options by only
allowing the use of eBay approved credit card payment services.
When eBay's marketplace customers have inquired if the merchant service they already use will be allowed eBay is demanding the seller turn over the seller's contract and terms of the credit card service prior to any consideration of allowing a service to integrate in the eBay
marketplace checkout. Not only is eBay forcing the use of eBay
checkout they are forcing the use of PayPal's gateway service Pay
flow, which limits the choices a seller can offer if their service
will not integrate and use the pay flow gateway. This results in higher
costs for consumers not only due to the cost of the service, but
also the extraordinary liabilities the marketplace seller assumes when using the PayPal service. Such as holding payments made to the seller for 21 days or more at the sole discretion of PayPal, the increased risk of unrecoverable loss if their PayPal account is compromised not only
exhausting their PayPal balance but also their recorded bank
accounts and credit cards on file and associated with their PayPal
account, and the increased vulnerability of marketplace sellers to
fraud relative to other payment services.
eBay purchases its competition, such as bill me later, which is a
service that competed with eBay's subsidiary PayPal's service pay
later. Clearly, the acquisition of the bill me later has
limited consumers choice of payment services not owned by eBay Inc... Bill me Later is also a service offered by the Amazon marketplace and its acquisition allows eBay leverage to pressure its competitor Amazon.
eBay has deliberately and plainly stated they will not allow Google
Checkout or Amazon payments in the marketplace, because those
products/services compete with eBay on too many levels. However,
these services do not compete with the marketplace, because the
marketplace is not a payment service it is a selling platform only.
Forcing the use of its subsidiary PayPal onto the large majority of
the eBay marketplace's customers is exclusive dealing and harms the
consumers both on and off of eBay by forcing its customers to pay
higher fees than they would with the Google Checkout service, and
increasing the demand of PayPal outside of the eBay marketplace
while oppressing/suppressing the Google Checkout service limiting
consumer choice and increasing prices consumers must pay. Merchants will recover PayPal's service fee by raising the price of the item causing consumers to pay higher prices than they would otherwise.
eBay is using predatory pricing to attract businesses such as
Buy.com, smartbargains, and shoplet, which also use the Amazon Marketplace, by allowing these large retailers to use the service with substantially reduced prices relative to eBay's other customers. This activity is also price discrimination, because they are discounting on the front end service fee, which means they are receiving preferential pricing prior to productivity. A back end discount might justify the reduced fees. eBay's reduced fees for these large retailers has disadvantaged its customers that must pay the full fees for the use of the marketplace's service, because they are not able to compete with a competitor that can list products for sale without limit due to their preferential pricing.
Also, eBay's implementation of the "best match" search result sort
where placement is determined by the total item cost + shipping,
the seller's score on their Detailed Seller Ratings a 5 star
feedback tool. The ratings are based on the buyers subjective
experience, knowledge or lack of the cost of postage, and eBay's
admitted mixed message in their guidance of the meaning of the star
and their application of the score. Such as, 4 stars for scoring
shipping is defined as reasonable to the seller's customer while
eBay will discontinue service to any seller who has a 30 day average
in any of the 4 criteria of 4.1%. Due to the reality that shipping
fee is the lowest DSR score for all sellers the small and midsized
sellers are pressured to assume the cost of postage in part or all.
However, small sellers do not benefit from shipping discounts so
this is causing substantial harm when coupled with eBay determining
the search placement based on the total cost including shipping
compounded by reducing the cost of of the services for Buy and
similar. This has resulted in small sellers being pushed off of
eBay, because they do not have the resources to compete.
eBay has also flat-out stated that they are disadvantaging items
priced higher than eBay believes the item should be priced by limiting their exposure in search. Again, this results in sellers who pay full price to use the service to reduce their prices so low the services is no longer advantageous to the seller. Unfortunately, many of these sellers have tens of thousands of dollars invested in inventory that they cannot sell effectively outside of the marketplace, thus they are stuck using the service even if they are effectively working for nothing. The degraded
economy added to the mix further pressures sellers to reduce their
prices to MAYBE get exposure in categories impacted by the enormous
quantity of listings Buy and similar are able to list without limit
due to their preferential pricing, so they can essentially move
their merchandise to convert to cash of any amount to pay the
mortgage and feed their children.
I read heart wrenching writings of the effects of eBay's activity everyday.
Please remember or know that many - 1.5 million - eBay has stated - people depend on the marketplace for their supplemental income. That means we are talking about senior citizens, disabled individuals, single parents, stay at home parents, and couples who both work full time but need the income they earn from selling their merchandise on eBay to survive. 750,000 US citizens rely on their business on the eBay marketplace as their primary or secondary income (again reported by eBay), and many of the relatively large sized businesses have employees who are by extension dependant on their employer's
success in the eBay marketplace. The effects of eBay's actions are not
inconsequential. The consumers both purchasing services from eBay and those who purchase from eBay's customers are hugely important to our economy. eBay's activity will ultimately result in consumers paying
higher prices after the small sellers who were able to offer reduced pricing are driven off leaving the door wide open for consumers to pay higher prices to purchase from these large retailers who are extinguishing the very competition that made the marketplace successful. Without competition there will be no incentive for Buy and similar to offer reduced pricing. eBay's preferential pricing has begun and will continue to ruin the quality of life for possibly 225 million US citizens and any associated employees.
Let us be clear John Donahoe's actions are not driven by any concern for my customer's. His purpose is to re-align eBay Inc.'s core business as the payment service. This is a fact and his anti-competitive activity will harm every e-commerce consumer.
Mr. Wingo you may view your observation as a sign of hope, but in reality it is an example of John Donahoe's anti-competitive activity, and the method he has implemented to acquire as many new PayPal users as possible, while essentially forcing eBay's smaller customers to bank roll the discounts given to the large retailers such as buy.com. I find your lack of insight to be disturbing given the service you provide. Wake up!
I am not eBay's seller I am eBay's customer
Paying for a service and expecting to receive that service is not even close to asking for charity- get a grip. If you are eBay's customer please inform me of what you have bought from eBay?
"Robert H. Swan
Thanks, Scott. You know, we end the quarter, you’re right, with $3.3 billion in cash. As you know, the reality of that cash is about $400 million sits here in the U.S. and the rest of it off-shore, so the inherent flexibility we have to use our strong balance sheet and our strong cash flows here domestically has a pretty severe tax rate penalty associated with it. So that’s a constraint that we have to deal with."
So if something did happen catastrophic to eBay, what do you think the chances are that they the stock holders & investors could get a grip on their share of the off shore holdings before it evaporated?
But the reality of eBay is that the sellers on eBay are the holders of the inventory!! All eBay does is to rent internet space? Which they often forget is that nobody holds deeds for areas in cyber space ..They often forget that every dime they buy their luxury jets & fancy cars with while they are double talking the press & stock holders comes directly from the sellers which now are leaving eBay in droves because of the non sense that has now reached a tipping point with most long term sellers..
While Meg & Donohoe like rubbing the shoulders of the rich & famous & catering to the stock holders while behind their backs keep inceasing the sellers fees (now up to 18% in some categories) to compensate for the sellers sales of those who have left to give these stockholders the illusion that they created a greater profit in any given quarter because they have done such a spiffy job.. They (the execs at the top) have forgotten that the EBAY SELLERS ARE THE REAL BACKBONE OF THIS BUSINESS, NOT THE STOCK HOLDERS!!! I mean how crass is it to cut the ebay seller customer service to bolster the bottom line to give the stockholders a few percentage points more in dividends?
Do they not relize that maybe HAPPY SELLERS may sell & produce more sales rather than to bleed the remaining sellers to death?
Opps, Well, I can go on forever here, but it looks like with the majority of cash holdings being held off shore, a stock that is dropping like a rock & a CEO bracing the stockholders for a big drop in sales in the 4th qtr LONG before the annoucement of the latest finacial crash looks like a corperation that's ready for some big move or calculated splitting act .. (PayPal alone is the crown jewel many are aiming for)
I do believe i read someplace that one of JD's jobs before he got to eBay was to break up big corperations & sell them off in pieces .. Correct me if I'm wrong, but if it walks like a duck & 2+2=4 , then I think it all looks sketchy to me ... Stock holders read the paper today where billions of investors assetts vaporated from one investing firm, What makes you eBay stock holders are special & above that flack?
Having said that, I think that most of us appreciate that the people currently in control of eBay are a bunch of unprincipled, disingenuous, (and possibly stupid) corporate snakes; it’s very difficult to keep track of such snakes as they slither through the undergrowth; and that “spinning” forked tongue doesn’t help any either!
A detailed criticism of the eBay “snake” starts at www.auctionbytes.com/f...
There is no appeal process & some DSR's can take up to a year to roll off so about 5% of eBays sellers fall below the 4.1 margin according to DSR WATCH and are now restricted from selling on ebay .. So the courtesy & love you though you were feeling was really like a gun to the sellers head ..
I can understand the DSR for ITEM AS DESCRIBED being very important so you know your not buying junk, I can somewhat understand the communication one, But i hate the zillion emails you get now with over cautious sellers , but what doesn't register with me is shipping time DSR the way it is legislated .. The seller cannot control the UPS or USPS delivery time .. If you were only rated from the time the order was paid for to the time it was shipped, I can understand, but it isn't & this is the one singular DSR that has tanked over 100 sellers I have charted with 100% feedback & a item as dscribed from 4.8-5.0 .. My feeling is if you have a 100% feedback & a DSR for item satisfaction of 4.8 or high then YOU ARE A GOOD SELLER & SHOULD NOT BE BOOTED FROM SELLING ON EBAY!!
the last non sense DSR is shipping cost .. Yes I know there are several people digging deep on shipping cost on eBay .. If they state a high shipping cost then don't buy from them !!! But to go further, There should be something built into the system that if you use FREE SHIPPING then this DSR shouldn't count !!!! If you use eBay's shipping calculator & ship for that exact cost then this DSR should not count but yet this is the 2nd most reason on the DSR's for sellers being booted from the site!!! .. Allan Kraig
Sorry I can't agree with you.
First I want to say: Keep up the great posts!!
You are dead on with your views of eBay, and its problems.
Secondly, let me fill you in on eBay+++ and LA101. They are eBay sockpuppets that come on these blogs to address some unknown agenda.
Another poster, Probuyer, should be along shortly to join their cause.
There is a good chance that they are all the same person.
Mr Wingo is a spin doctor, worried about his future since his interests (job) rests with eBay's success.
A few cheerleaders will not keep silent the vocal majority telling the world about the way eBay is treating it's customers, the sellers!
"All the scenarios you described could have been avoided with proper communication."
The listings clearly indicate the cost of postage and the length of time you should expect your package. What other communications do you require to understand - there isn't any room for confusion it is all very straight forward.
I buy on eBay all the time and my experiences have not changed at all. The reason, because I am careful who I buy from. I note how long it will take to be delivered and if it's longer than I like I don't buy. I look at the cost of shipping and if I feel it is out of line I don't buy. If I email a seller with a question and they don't respond I don't buy from them. WTH is so hard about this. You want to make careless purchases and then blame someone else for your immature negligent decisions. It is your fault, you own it, and you should have to live with it. You are out of line and reckless with the lives of people who gave you all the information and/or because you failed to acquire information important to you.
You need to grow up and take responsibility for your actions. If you can't manage to shop in the big world of adults than maybe you need to stay out of the market.
Chelle7 your post makes no sense? Sorry, don't know what your point is?
Thanks for the flattery! But guess again!
You don't understand Chelle7's post???
Better stop spending so much time buying on eBay and take a course in reading comprehension!
Me, One bitter seller???
Check out auctionbytes blog after an interview with Uncle Griff:
www.auctionbytes.com/c...
You answered your own question, Wingo. One well advertised lost leader does not a trend make. You can't spin this datapoint into anything more than cotton candy.
There is also no promise that just because the feedback a seller gets from a buyer is positive that the DSR scores they leave or do not leave reflect the same.
So, the scores have no value. I have had raised exposure in the search one day and then three days later due to one buyer leaving less than a 5 I am suddenly lowered in the search, a days or two later I hit standard. I'll watch 5 +++ feedbacks roll in and maybe one or two of those buyers will leave DSR stars as well.
My Item as described score always is the highest hovering 4.85-5.
I am walking on eggshells all the way thanks to the geniuses that I pay to be treated like this.
I never dreamed that I would really become a.....
hey pimp daddy eBay!
But, I am working at home and available for my son who has spina bifida, and I was doing it without fear of being let go from a job, not anymore.
I have faith that somehow this too shall pass.