eBay Dangles a Carrot to Pacify Its Sellers

eBay Inc. (EBAY - Analyst Report) recently revised its incentive scale in an attempt to pacify ruffled sellers who are facing shrinking profit margins. The company also expects the new policies to encourage the best sellers to stick with eBay.

The company now promises a 20% discount to top-rated sellers on its Direct Seller Ratings (DSR) system. The rating system outlines four criteria based on which the vendor and the buying experience are evaluated by the buyer.

We believe the incentive revision will have limited impact on eBay’s performance. Management’s main problem seems to be the rating system itself. There is also a serious lack of communication between the company and its seller partners that could build a wall between buyers and sellers, rather than a bridge.

The fact that most sellers are unaware of any written policies that govern them is another major stumbling block. The rating system does not even consider all buyer feedback to be of equal value.

Another serious allegation against eBay is management’s habit of taking seemingly arbitrary decisions. For example, many vendor accounts have been suspended for no specified reason, thus increasing discontent.

Management also announced a reduction in payment options, specifying that sellers should not accept payment through checks and money orders. While this could increase the use of paypal, it shuts out buyers who do not want to go through the rigors of acquiring a paypal account.

We think management faces a number of issues. The first and most important is the perception of buyers and sellers regarding the company. eBay started out in 1995 as an auction house helping small sellers get the best price for their product. The customer base developed likewise, on the belief that products could be obtained at eBay for a reasonable price.

These dynamics have gradually changed with other classes of buyers visiting its website and the company adding larger suppliers and more popular brands. It is a pity that some continue to perceive it as “cheap”.

Management needs to get its act together if it wants to avoid alienating both buyers and sellers. In our opinion, marketing, supplier relationships, technology and website management are areas in need of particular attention.

Product definition is another important area, which the rating system does not clarify. While a good definition would attract the correct class of buyers, the failure to provide one would exacerbate buyer dissatisfaction. For a company that is supposed to bring buyers and sellers together, eBay certainly has a lot of work to do.

Comments

[Patricia013:]

Time will tell but I see Ebay as its own worst enemy - bad managment that is clearly inexperienced and arrogant to boot has driven a wedge between buyers and sellers and between sellers and Ebay itself. Its a bad environment - one that Ebay managment foolishly calls "fun". Yeah, they have a lot to do - we all agree on that...BUT do they have the mentality and the experience to do it? I'm thinking "no". Their reputation has been sorely tarnished and word of mouth from angry sellers continues to pummel them. So...time will tell whether or not they reach their goal - if they, in fact, even know what that may be.

Aug 20 12:52 PM

[Bob C:]

eBay *jumped the shark a long time ago!
They are now just loopy sharks themselves, hunting in soon to be sterile waters!

*(a term to describe a moment when something that was once great has reached a point where it will now decline in quality and popularity)

Aug 20 01:24 PM

[Philip Cohen:]

No matter how “Noise” Donahoe and his sycophants spin it, the eBay marketplace is going down the toilet. Donahoe and his policies are eBay’s greatest problem: sellers are leaving in droves; buyers too apparently. Why would anyone with even half a brain want to so risk crippling this golden goose?

The auction system has always been broken as far as protecting buyers from shill bidders is concerned, and made even more insecure now by the very changes that eBay, disingenuously, claims will improve such security.

The people currently running eBay are a lot of greedy, unscrupulous, disingenuous, incompetent buffoons, and I predict that there will be no more performance bonuses for them, at least not “above the table” ...

Donahoe and some market analysts seem to believe that PayPal’s manning of the pumps will keep the good ship “eBay” afloat. I certainly would not put my money on the “clunky” PayPal for the long term. Assuming that the parties don’t have some agreement to not compete, I have no doubt that eventually those other well known “loan sharks”, the major credit card companies, will get off their butts and introduce a similar universal card/terminal-less on-line payments system that the participating banks can incorporate into their internet banking systems—and they, at least, will do it properly—and that, my friends, will undoubtedly be the end of PayPal outside of the Donahoe-dwarfed eBay marketplace ...

I recall that Donahoe has been quoted somewhere as saying that the door is slightly ajar for a potential spinoff of his company’s online payments unit. If this is correct it will be the first logical thought that this guy has ever had; he otherwise clearly has no idea of what he is doing at eBay. If that MBA taught him anything then he should be using whatever skills he does possess to negotiate with the banks to take PayPal and integrate it into their online payments system—in exchange for an appropriate interest in the consolidated business, of course. Because, the more successful PayPal is, the more likely it is that the banks will finally get off their butts and introduce a like system; if and when that happens the banks will do the job properly and will exterminate PayPal for being the “irritating insect” that it is.

<b>Shill Bidding on eBay: a Case Study</b>

A detailed examination of the crime of shill bidding and the abuse of eBay’s proxy bidding system—all exacerbated by eBay’s introduction of “hidden bidders”—plus a detailed general criticism of eBay’s “clunky” auction platform, and policies, at

<url>www.auctionbytes.com/f...;/url>

A synopsis thereof:

 very little of the auction system security, that eBay claims to offer buyers, exists in fact;

 contrary to their claims, it can be demonstrated that eBay has no “proactive” nor “sophisticated” system in place for the detection of undisclosed vendor (“shill”) bidding, and indeed eBay does nothing about such criminal activity except as a reaction to a user’s report of such, and even then eBay’s ultimate response will be unconvincing;

 eBay has no effective matter-of-course verification of users: unscrupulous users can apparently have as many user IDs as they may have email addresses;

 many of eBay’s “rules”, concerning the retraction of bids, cancellation of auctions, etc, are nominal only and are no bar to the machinations of the unscrupulous seller;

 as a result, eBay’s “proxy” bidding system is so open to abuse by such unscrupulous sellers that to use it, as eBay intends it to be used, can be an invitation to pay the maximum you have indicated you are prepared to pay;

 by the lack of any effectual system to proactively detect shill bidding, eBay has ever effectively, and knowingly, “aided and abetted” unscrupulous shill-bidding sellers to defraud naïve buyers; by so doing, eBay benefits from a higher “final valuation fee”;

 the masking of bidding IDs with non-unique, absolutely anonymous aliases serves no purpose other than to further obscure all but the most blatant of shill bidding, and defeats any attempt at programmatic analysis of individual bidding patterns to expose such activity;

 the quarterly changing of even these non-unique, absolutely anonymous, bidding aliases serves <i>absolutely<... no other purpose than to stop even experienced eBay users from attempting to manually track suspicious bidding activity over time;

 the anonymous, individual bidder Bid History Details pages, supposedly supplied to offset the absolute masking of bidding IDs, although better than nothing, will usually present an ambiguous view and, in such circumstances, are of little value;

 anyone naïve enough to make other than a last-moment “snipe” bid on a seller-elected “private” auction (ie, “User ID kept private”), on the balance of probability, is going to be defrauded—and eBay knows it;

 when suspected fraud <i>is</i> reported, and is found by eBay to be proved to their satisfaction, eBay will conceal that fact from the victim of the fraud; this then is the concealing of a crime after the fact—surely, a crime in itself;

 eBay will never acknowledge to a victim that a fraud has been perpetrated, nor indeed will eBay acknowledge that such fraud is even a problem on eBay auctions; eBay therefore sees no reason to provide any mechanism to aid in the recovery of any monies so defrauded;

 if eBay did have any proactive and truly sophisticated system in place for the detection and control of shill bidding, we would not now be having this debate;

 for those buyers (and honest sellers) who embrace eBay believing that eBay acts as an “honest broker” between buyer and seller, I can only say that you may as well believe that there are fairies at the bottom of your garden too; and

 the most outrageous aspect of this matter is that we all would be, quite rightly, upset if our local auctioneer, from whom we were buying, was found to be facilitating and concealing such criminal activity—and here is eBay, knowingly, doing just that to the whole world!

Aug 21 09:05 AM

[arlin:]

www.rediff.com/money/2...
above is an old story of all the misguided changes Mr Donahoe was to bring to the on line flea market.

Aug 21 09:54 AM

[arlin:]

www.rediff.com/money/2...
above is an old story of all the misguided changes Mr Donahoe was to bring to the on line flea market.

Aug 21 09:54 AM

[Ebay user 1:]

While this discount gives normal sellers with high DSR score a 20% discount on Final Value fee's and yes that is a new change.

Power Sellers with 4.9 or better rating stars have got this 20% discount since early 2009 so thats old new's for them.

Whats a newer developement and not ever talked about by Ebay is the fact that Power Sellers got a 40% discount on their Final Value Fee's if they offered "Free Shipping" that is "gone" now, they can only get 20% off max, since this new developement of giving regular sellers 20% off with high DSR score.

So the Power Sellers with 4.9 Stars that offered Free Shipping their Ebay bill has actually gone up 20% ... if you look on Ebay in the past month all the Power Sellers have removed the Free Shipping option.

More Spin from Ebay to screw those who sell and list the most product, so in the end this is just more price raising by Ebay.

The free auction 5 listings a month arent free by any means, they almost double the Final Value Fee's if you would happen to sell those 5 items.

So basically they are charging more once again, people need to dig into these policies more than what Ebay spoon feeds them, its just another increase hidden by Ebay spin folks.

Aug 21 12:49 PM

[a. palmer jr.:]

I noticed that every time ebay gives the seller something they take something away from them. People aren't stupid...they know that ebay is just in it to take them.....just like the car dealers of the past (and probably present) that offer a 10% sale after raising the price 20%. It doesn't work when there is competition, and there is! One thing about ebay, the sellers, for a large part are also the buyers, so if you alienate one you really lose two customers, which they are doing.

Aug 21 02:45 PM

[Aheadsup:]

Here's a novel ideal for ebay -- Just price things right in the first place and you wouldn't need to discount them. Ebay (the one from days gone by that was widely respected) used to offer the odd special from time-to-time...and they would actually save the seller some money. Now, any "special offer" ebay puts forward always have more disclaimers in them than discounts. If ebay truly had a deal to offer sellers, you wouldn't need a lawyer and a translator to decipher it.

Aug 21 02:56 PM

[Aheadsup:]

Very good points, a.palmer jr.

One other thing you should remember too is...not only does ebay lose the money (as buyers are sellers on their site) they also lose the money to the competition because those sellers/buyers continue to buy...just not from ebay. So, it's kind of like two double-edged swords scalping ebay at the same time. I like to call it "compound DISinterest.".


On Aug 21 02:45 PM a. palmer jr. wrote:

> I noticed that every time ebay gives the seller something they take
> something away from them. People aren't stupid...they know that ebay
> is just in it to take them.....just like the car dealers of the past
> (and probably present) that offer a 10% sale after raising the price
> 20%. It doesn't work when there is competition, and there is! One
> thing about ebay, the sellers, for a large part are also the buyers,
> so if you alienate one you really lose two customers, which they
> are doing.

Aug 21 03:02 PM

[jay dee:]

Here's another carrot; ebay is so generously "offering" it's customers (the sellers) a limited time offer - for only 25 cents more you can include up to 12 pictures in your ad !!
Gee I bet that's really costing ebay some money, seeing most people don't usually put more than one or two pictures in !
Another phony POS "benefit" ebay is insulting it's sellers intelligence with - trying to suck people into spending more money listing their items.
Me I'm going to hold out for the flower border around ads.
I figure they will be offering that one soon because we all know people will buy more junk (they don't need) if there are flower borders around ads.
Ebay just go back to the basics - the way things were before the Big Hoe took over !

Aug 23 09:49 PM

[exodusfromebay:]

This won't work either - and eBay knows where they can shove that carrot.

Aug 24 02:07 PM