Major Changes Announced by eBay: Part II

This is part II of a III part 'eBay Strategies' series detailing and reacting to eBay's (EBAY) second round of 2009 changes announced today (aka the Summer release or what they call SR2 internally@eBay).

• Part I covers the search and seller efficiency changes and is here.
• Part II (you are here) covers the eTRS.
• Part III looks at the Summer changes package and offers some thoughts/analysis.

ChannelAdvisor is also hosting a webinar on August 4th (next Tuesday) at 2pm ET where we will detail the changes and go through some tips on how to start preparing for the changes now. We'll also highlight some strategies on how to take advantage of the changes before the holidays.

Be sure to register for the eBay changes webinar here (it's the top webinar, or click here to go directly to registration).

Introducing the eBay Top Rated Seller Program or eTRS as we say in the 'biz'

The logo (right) is the new 'badge' for the eTRS. There are a LOT of changes this new program is bringing to the World of eBay sellers so i wanted to dig into them in their own post. The way I would characterize the changes is: lowering the volume requirements, while significantly raising the quality requirements for powers sellers and then creating a super-elite status eTRS that requires you to have the highest of high customer service ratings (via DSR 2.0) and if you do, you get the rewards of 20% FVF discount as well as raised search status and the dandy little badge above 'may' be in search results.

The changes are best thought of in these chunks:

1. Foundational changes - eBay is changing the whole game with how they look at DSRs. I call it DSR 2.0 and walk you through it here.
2. All seller requirements - Sorry no benefits if you are a lowly 'standard seller'.
   
3. Powerseller requirements - includes some 'diet' benefits.
   
4. eTRS requirements - (Very juicy) benefits.

Foundational changes

• DSRs 2.0 - First, eBay is significantly changing the way DSRs are calculated. In addition to the 'average' of the DSRs, they are going to look at the actual 1 and 2 star ratings. This is going to be a major mind-shift for sellers as they are not used to looking at the 1's and 2's specifically. While these are available in the dashboard, it is not trivial to pull the report and it's monthly.
• DSRs go domestic - One positive in all this is that eBay seems to finally be acknowledging that there is a material (we see .2 on avg) disconnect between the domestic and non-domestic DSRs. Thus for these programs and search moving forward they will only be looking at the domestic DSRs. As best I can tell, non-domestic DSRs don't factor into anything any more, so essentially don't matter and can be ignored (I bet that will change).
• Seller Dashboard 2.0 - eBay is revamping the dashboard to have real-time data around 1's and 2's.

DSR 2.0 calculation primer:

The way the new DSR 2.0 calculations 'work' is a little tricky so I wanted to cover that in detail. eBay is calling the calculation the 'Max 1s and 2s on DSRs'. The way it works is for each of the 4 DSRs (1-item descrip, 2-communication, 3-ship time, 4-s+h $), eBay is now looking at the % that receive a 1 or 2 star. It doesn't matter if it was a one-star or two-star, just that you got something down in that low rating area.

For example, if you have 100 transactions and receive:

• item descrip: 4 one-stars and 2 two-stars
• comm: 3 one-stars and 3 two-stars
• shiptime: 2 one-stars and 4 two-stars
• s+h$: 6 one-stars and 6 two-stars

In that situation you would have these %'s of one and two stars:

• Item descrip: 6% (4+2)/100
• comm: 6% (3+3)/100
• shiptime: 6% (2+4)/100
• s+h$: 12% (6+6)/100

Pretend the requirement is 6% one/two stars on all DSRs, in this example, the S+H$ would trip you up as you would be over. Remember this as you read on:

• The calculations are based on the % calculated by adding the one and two stars together for each DSR and then dividing by the number of transactions.
  • A formula would be (one-stars+two-stars) / number_of_transactions = MAX 1s or 2s on DSRs.
• Anything OVER the max trips you up and can either keep you out of the eTRS or even being a seller on eBay.

The hardest part of these changes for large sellers is going to be getting actionable solutions to stop the 1's and 2's. I also think the new view of DSRs is skewed against larger, high volume sellers. For example, based on our analysis this will be a big problem for 20-25% of eBay's largest sellers. The 'cure' is to tell them to get less 1's and 2's. Hmmm, ok.

I guess eBay has found that 1's and 2's are really really bad or something as they seem heck-bent to get rid of them.

Requirement and benefits changes

This is really really confusing as they are actually making changes in two different timeframes. There are near-term Oct 09 requirements and longer-term April 2010 requirements. There are also different segments of sellers impacted. The way to think about it is in 'stacks'. At the bottom of the stack you have 'all sellers' - meaning you will be booted if you don't meet these basic seller requirements. Next you have Powerseller status and then you have the new uber-elite eTRS tier.

What I've attempted to do is cover this from the 'bottom' up - or go from the bottom of the stack - all sellers - up to eTRS. Where appropriate, I'll mark 10/09 and 4/10 to make it clear which are near-term vs. further-out.

The next section details the new requirements that all sellers have to meet.

Requirements for ALL sellers

• No insurance - All sellers have to stop offering insurance. (PERIOD!) This is a profit area for many sellers and will put pressure on margins. eBay's suggestion is to not make it optional and to put it in the cost of the item or S+H (but they want free S+H, so they really mean cost of the item).
• New 'Selling Practices' policy - This one makes me pretty nervous because it is a very broad net and uses words like: "professionalism" and "tone". The examples they give are extreme like: "eBay forces me to do this.", but you can see implementing enforcement on this one is going to be very tough and subjective. If history is an indicator, I expect to see a raft of canceled listings and NARUs from this one before it gets reeled back some. Selers will be reporting each other for professionalism and tone like crazy in the early days as well to gain a competitive advantage. If you have a couple of hours, you can read a 6 page treatment on the thing here. 6 pages? Really?
• Volume - none.
• Rewards - none
• DSRs - none - they are eliminating the 4.3 min DSRs (kind of) and replacing with:
• DSRs 2.0 (% of 1's and 2s - see foundational section for calcs)
  
  • 10/09 -You have to be under these MAXs:
    • 3% for Item description DSR
    • 4% for all other DSR
  • 4/10 - You have to be under these MAXs (they are significantly ratcheted up)
    • 1% for item description DSR
    • 2% for all other DSR
• Carrots (well, sticks) - your search standings are basically lowered and you get 0% on FVF credits.

Once you meet the 'seller' criteria, the way this new system works is the better you do on those DSR 2. 0 %'s, the more benefits you get. The next tier up from vanilla seller is Powerseller.

Powerseller (PS)requirements

In a simple sentence, the PS requirements take the basic seller requirements and add a volume and feedback requirement to get in the program. Thus, most folks that qualify for sellers of any size will make it right into the PS program. They have essentially lowered the bar here pretty significantly on volume side, but kept the quality/DSR 2.0 bar the same with the 'seller' tier.

• Volume requirements - (4/10) In what appears to be a fig leaf extended to smaller sellers that have felt really thrown under the bus over the last several years, eBay is significantly lowering the volume requirements to be in the Powerseller program (I will call PS for brevity). You simply need to be doing 100 transactions or $3k/yr on eBay. That used to be around $12k to be in the PS program, so they've dropped it 75% essentially.
• Feedback: 98%+
• DSR 2.0 - same as basic seller status above.
• Carrots/Rewards
  
  • 10/09 FVF discounts
    • 4.9 DSR - 20%
    • 4.8 DSR - 15%
    • 4.6 DSR - 5%
  • 4/10 FVF discounts (note the above go away 4/10)
    
    • 5% (to get higher you have to be eTRS, keep readin')
  • Search standing: neutral (to get raised you have to be eTRS), but at least you aren't in the lowered bucket with the poor 'basic sellers', so if it makes you feel better, you are advantaged against them.

eBay Top Rated Seller Program (eTRS) requirements

This new tier really ratchets up the quality and corresponding carrots, but doesn't add anything on volume.

• Volume requirements - same as PS
• Feedback - same as PS
• Min DSRs: (this is different than PS)
  • 10/09 - 4.5 min DSR avg
  • 4/10 - 4.6 min DSR avg
• DSR 2.0s (% of 1's and 2s - see foundational section for calcs)
  • 10/09 and 4/10:
    
    • All DSRs have to be above .50% on the one/two star scale.
      
    • For small volume sellers, max of 2 one/two stars
  • Said another way, for every 200 transactions you can have ONLY 1 one-star OR two-star, or else you will not qualify.
  • That is a very very high quality bar, especially on the S+H cost DSR - my sense is you could only get here with free shipping based on early data I've researched. More on this in part III.
• Carrots of the eTRS
  
  • 10/09 and 4/10:
    
    • 20% FVF discount
    • Raised search standing
    • Top-rated seller icon/badge thingy
    • You can do featured first (so this went away for all but eTRS sellers)

Up next, part III

So there you have it, my best pass at explaining this revamp of the DSR/powerseller program and introduction of the eTRS program as well.

In the next part of the series we'll look at this batch of changes holistically and

Disclosure - I am long Amazon and Google. eBay is an investor in ChannelAdvisor

Comments

[Snitzer:]

Why I don't fool with e-Bay: Too complicated, too big a learning curve to either sell or buy, the thing is growing out of control (kind of like the US Gvmt) and there is no visible fun.

Jul 28 10:26 AM

[Patricia013:]

Well, with over 3,500 feedbacks - never a negative and DSR's of 5.0 I've decided to stop listing on Ebay. My items are all made by me and even with a perfect record I cannot get a badge since I can no longer sell over 100 items a year - not on ebay's present platform. In 2007 I gathered over 350 feedbacks and thought business was down - since then I'm nowhere near 100 feedbacks. So, after all these years of giving perfect service to my customers Ebay has finally squeezed me out and I must move on. THAT is the plight of many small sellers today - something that Donahoe is going to miss very soon and especially in this economy. Many of us have thrown up our hands and no longer want to struggle in such an outrageous environment! Mr. Donahoe...you can keep your precious "new ebay"!

(and for the "tools" don't think for one minute I will stop posting and telling the truth about this company!)

Jul 28 01:07 PM

[eBay +++:]

Patricia, I thought you left long ago? Still whining about eBay? Take a good look at the stock price ;). Obviously eBay has moved on without you, time for you to do the same.

Hey Bob C. eBay washed a lot of pain away in the last few weeks. I'm a happy camper again, flush with Cash. I told you this QTR would be solid.

Jul 28 02:57 PM

[Patricia013:]

"Patricia, I thought you left long ago? Still whining about eBay? Take a good look at the stock price ;). Obviously eBay has moved on without you, time for you to do the same. "

LOL ....in your dreams! I'll be around and posting so my advice would be for you to learn how to skip over them.

Jul 28 03:23 PM

[Bob C:]

@eBay+++
"Hey Bob C. eBay washed a lot of pain away in the last few weeks. I'm a happy camper again, flush with Cash. I told you this QTR would be solid."

The mother company is down again YOY, and the shares are starting to fall today. I guess you think Jello is solid too.
Better sell soon!

Here, for a change, is a true picture of eBay:
seekingalpha.com/artic...

Jul 29 10:59 AM

[Patricia013:]

LOL Peel away Paypal and Skype and what you have left is a truly pathetic Ebay - full of holes from John Donahoe's tinkering with NO solid business plan. Year over year sales have been declining since last year - whoever is buying this stock is buying it for Paypal and Skype and NOT for Ebay! Bob is absolutely correct on this.

Jul 29 11:46 AM

[exodusfromebay:]

John Donahoe continues to take steps to destroy the core marketplace - driving away or suspending millions of small- to medium-sized sellers, the very people who are the backbone of the company, and are the main income stream.

The focus on large volume sellers and fixed price is insane. Copy-catting Amazon is shear stupidity. This man has an MBA? Where From, a Cracker Jack Box?

This arrogant idiot's every move has been designed to destroy the "flea market atmosphere" he despises. What an elitist snob!

JD needs to realize that you can't scuttle one of the strongest brands in history (eBay is an Auction site) while antagonizing the entire client base (eBay Sellers who pay PayPal and eBay fees) and expect to stay in business.

The company is going down for the count, it's just a matter of time.

He has destroyed the supplemental and primary income streams of million of users. I wonder how much he has to spend on security and bodyguards?

JD doesn't understand the business he is trying to lead - and he obviously can't find his behind with both hands and a flashlight.

Donahoe has Got to Go.

Jul 29 01:40 PM

[nadine:]

Ebay is instituting a new Top Seller program that is so open to manipulation that I can keep any of my competitors out of it permanently by simply ordering 10 widgets from them in one order, and giving them ten bad DSRs. The DSRs are anonymous, so I can cover my tracks by giving positive visible feedback.

If my competitor gets fewer than 2000 DSR ratings a year (normally you only get rated on about half your sales, so this means he sells about 4000 items a year), my one bad rating alone will push him over the ridiculously low 0.5% low DSR bar, and he will be out of the Top Seller program. As an added bonus, if he gets fewer than 500 ratings a year, I have pushed him over the 2% pass/fail bar, so he is now a "BAD" eBay seller who will be put on a 12 month restriction. Even if every single one of his other 1000 transactions was absolutely perfect with 5.0 DSRs across the board.

So one malicious review can put a small seller out of business. Easily.

Remember that one of the DSR criteria is "Shipping Time" which is not even under a seller's control. Woe betide you if the Post Office ever loses one of your packages for a couple of weeks.

Aug 02 07:57 PM