Why eBay Needs Shipping Cap

Back in August, along with a host of other changes, eBay (EBAY) announced shipping maximums (caps) for the media category.  They also published a checklist that pinned the date to October 5th.  Well here it is October 6th and... nobody knows why, but it hasn't rolled out.

Some sellers are reporting they've heard October 16th, others say it's been delayed till Q1. What's disturbing is nobody at eBay seems to know the answer.

Why does this matter?

You may be asking yourself why does this even matter? Why can't sellers just go ahead and set up the limits now and not worry about the date.  The problem is that e-commerce is a zero sum game and a marketplace has to change all at once for someone not to be the loser.

Let's look at scenario, for example video game systems (with a $15 shipping cap as per eBay).  Let's say these are $100 items with shipping included (all in).

Seller A lists these for $80 and $20 shipping.

Seller B lists these at $1NR with $20 shipping.

Seller C is a model citizen and lists them at $85 with $15 shipping.

Seller D is also a model citizen and is an auction traditionalist, starting the systems at $1NR with $15 shipping.

The whole reason eBay is implementing the shipping caps is because eBay buyers don't look at S+H cost very closely so with that caveat, Seller C is immediately at a disadvantage because their item is $85 vs. $80 on the others. However, if they do get a sale at least it will be for the $100 target.  If they do sell something, they'll have the pleasure of paying eBay's FVF on $5 more so they face a higher effective take rate vs. non-compliant sellers.

While Seller C is in pain, Seller D is truly hosed because to buyers it looks like the market is saying $80 for the items, thus they stop bidding at $80 and the seller is left with a paltry $95 in total sales.  What's $5 you may ask yourself, well this seller was probably going to fund some S+H cost in the core price so they get a triple wammy.  Electronics margins are very thin and $5 on almost any sale with of $100 item destroys all margin.

Time for eBay to get buttoned up on these changes

The bottom line is eBay has to start realizing these changes impact their customers in serious and profound ways and are not to be taken lightly.  Of course a (maybe) unintended consequence of these kinds of random activities is that they really destabilize auction sellers who find themselves having to switch to fixed-price for some continuity or leave eBay for other pastures.

Can you imagine any other business doing this?  What if your employer told you pay day would be October 25th and then moved it to October 31st?  What if you hustled to do your taxes, and the IRS moved it June this year unannounced? Those seem ludicrous, but this is how it now feels to sell on eBay.

Comments

[downwithebay:]

That's a joke! Ebay doesnt care whether seller A, B, C or D gets hosed as long as ebay makes as much money as possible. By basically forcing free shipping on everyone and/or place very low maximums in certain categories increases the likelihood of ebay getting a larger commission on EVERY sale and basically double dip on shipping charges since PayPal already getrs a commission on the full sale including S&H.

It's all about ebay's greed and nothing more!

2008 Oct 07 10:59 AM

[Phiota:]

The real reason that ebay is doing this is because seller E will sell the media item for $1 and have shipping @ $99. This will cause eBay to make less money since they collect a commission on the sales price not the shipping cost.

John

2008 Oct 07 11:10 AM

[focus123:]

Reply to Phiota:

Excessive S/H on ebay is already banned. $99 is already considered excessive S/H and not permitted per ebay current policy. This new policy is being introduced to better compete with Amazon.com and take more on the FVF.

2008 Oct 07 11:53 AM

[User 275536:]

Spot on, Scott. That's just one example of exactly how 'coordinated' ebay is. They forgot they had Turbo Lister so when they rolled out the $.35 fixed price option, there was nothing in the program so sellers couldn't use it. The last updates took away seller's handling time options and it's probably around 9 months now and sellers still don't have the right Buyer Restrictions in Turbo Lister. Requests for stuff to be fixed - ignored - but they're laying off the little guys who may actually do some work there instead of the suits in their offices.

2008 Oct 07 11:57 AM

[jack dee:]

Guys it is about customer trust.

Lots of people are turned off by the tricks and BS that goes on all over Ebay.

Hidden refurbs grey market goods, Shipping charges , fakes. And until now the good old NEG for a NEG rating scheme.

Ebay was getting nasty ugly and not worth the effort. By cleaning it up they might be able to get the buyers back.

(MSFT cashback / ebay program must have boosted the numbers)

2008 Oct 07 12:36 PM

[Dinah Balk:]

Donahoe expects sellers to lose money on shipping but the last laugh will be on him because the moment the new rates go into effect sellers will walk because I don't know one seller who is willing to donate part of their mortgage payment to eBay.

2008 Oct 07 12:38 PM

[ebayseller1946:]

Your point about how ebay makes announcements of upcoming changes (fair and unfair) and dates by which changes will occur and sellers are expected to comply is a good point, one that causes sellers endless grief.

Some sellers who have substantial inventories and listings to change actually do try to change their listings to comply with the announced new rules. This takes them enormous amounts of time. They then have less time to create new listings and do all of the other work associated with selling on ebay. So they sell less. Then ebay announces another change and they have to change all their listings again. And again. And again. Much of the time ebay never goes through with the change that had been announced or doesn't do it by the date that they said it would be implemented. So all of that work is often wasted effort by the seller. This results in less sales and poor seller morale, less money being made by sellers and ebay, and sellers getting so fed up that they look for other places online to sell that have their interests in mind.

The company is being run very poorly with little regard to the best interests of their sellers. You would think that they would try to keep their sellers happy but currently the management doesn't seem to get it. Sellers have better things to do than revise their listings which have already been revised and revised and revised. I'm not even addressing the issue of shipping caps. I am just talking about all of the changes, many of which are unnecessary and unfair to sellers, which make more work for many of ebay's best sellers.

2008 Oct 07 12:52 PM

[sign9:]

The shipping caps are absurd. I ship items in the 16mm film category - most weigh between 7-15lbs. I ship UPS and it costs me between $8-$20 per item to ship. If I really have to limit my shipping charge to $6, I'm going to lose $2-$14 per item....

For the moment, I've switched to using all calculated shipping, but who knows how long ebay is going to allow that...

In a free-market economy the whole idea of ebay telling sellers what they can and can't charge for shipping is ridiculous.

If they're so worried about buyers getting "confused" or sellers getting disadvantaged, there's a much simpler solution -- just show the price including the shipping charge in BIG TYPE for each item. Then the buyers will be able to compare apples to apples, and there will be no need for caps...

The reason they wont do this is that the real reason for shipping caps is to make people like me raise my prices so that they can get a percentage of the shipping cost in fees.

2008 Oct 07 01:14 PM

[Karina1:]

Ebay has established a list of shipping charges for the media items which is totally unrealistic. I'm referring to the published list on ebay under the new rules and policies.

For instance shipping for books. Many sellers ship books in lots. If the seller uses the maximum shipping allowance for 50 books which is $8.00, the seller will pay additional shipping because the $8.00 do not cover the shipping charge.

The seller will pay more out of its own pocket. Ebay also said to up the price of the books to cover the extra shipping which is benefitting ebay because of the FVF.

So much could be said about this issue. I predict many sellers will move on and leave ebay, which seems like that is what ebay wants. Ebay has changed so much away from its original business. I as a buyer don't like to shop on ebay anymore because of all the changes, searches where you can't find anything, and the fraud issues.

These are just my 2 cents.

2008 Oct 07 01:23 PM

[marcopasha:]

The problem that eBay is responding to is that most buyers do not pay close attention to shipping, even when made very clear. However, this phenomenon is not just limited to shipping. Honestly, as a seller, I have consistently auctioned off used items that were bid to a much higher price than they could have been purchased brand new. Though I, as the seller was delighted, it probably did not take long for the buyer to realize that they had paid way too much. Those buyers probably have a pretty bad taste in their mouths, which is why they have abandoned eBay. This move by eBay is an attempt to level the playing field and protect buyers from their own ignorance. Perhaps, based on the retail price of an item, they should have a bidding cap too.

2008 Oct 07 02:03 PM

[nadine:]

<i>The bottom line is eBay has to start realizing these changes impact their customers in serious and profound ways and are not to be taken lightly. Of course a (maybe) unintended consequence of these kinds of random activities is that they really destabilize auction sellers who find themselves having to switch to fixed-price for some continuity or leave eBay for other pastures.

Can you imagine any other business doing this? What if your employer told you pay day would be October 25th and then moved it to October 31st? What if you hustled to do your taxes, and the IRS moved it June this year unannounced? Those seem ludicrous, but this is how it now feels to sell on eBay.</i>

Scott, let your ears hear what your mouth is saying. Are you still happy to be long eBay? The reason for all the unintended consequences is staringly obvious: the MBA gearheads running eBay have no idea how sellers do business on the site. All they know is the numbers in their computer models. How their bright ideas actually affect real sellers and buyers always catches them by surprise.

2008 Oct 07 03:17 PM

[SgtSally:]

There are 3 reasons I no longer use E-Bay.
1. Shipping costs are frequently outrageous. Even if you don't get gouged by the seller, the costs of shipping are very high.
2. Of the things I buy online, I can usually find it cheaper from a known, trusted firm.
3. E-Bay functions as a high tech fence for stolen property. Buying anything there that would be on a burglar's list of stuff to grab after he kicks in your neighbor's back door is 50-50 chance its stolen.

2008 Oct 07 05:21 PM

[Kyle MB:]

Never a shortage of eBay drama. The fact is that eBay has consistently increased fees and changed policies to benefit the buyer and itself.

I am a former power seller and graduated from eBay to an independent online store. Revenues and more importantly PROFITs have grown more than 3 times.

eBay is a great place to learn the ropes of e-commerce but for most people, it is not a place to grow an online business.

See this trend for yourself here:tinyurl.com/52r2o9

2008 Oct 07 05:46 PM

[cloudy66:]

Starting Oct-20th ,some sellers as well as Buyers have Civil Cases that will be filed against E-bay.This is the same day E-bay will stop accepting checks and money orders,forcing some people to use there Paypal,which lawyers view this as discrimination,to there advantage.

2008 Oct 09 01:05 AM

[downwithebay:]

ebay claims shipping caps are important for the buyer's satisfaction, YET if you look througg gemstone listings (high buyer volume) and alot of jewelry listings, you'll see that many sellers have standard shipping rates of anywhere from $7.50 to $20 to ship a one ounce gem, and majority of these asian based companies run exclusively 99 cent auctions or very low buy now prices with much of the total cost of product built into the s&h. Asian based companies selling gemstones, jewelry and many other types of merchandise have been dominating ebay US sales for years in many listing categories, and ebay says nothing about these large volume sellers charging ridiculous s&h rates on gemstones and other items that have large buyer volume.

Interesting how only media and electronic sellers are held to tight shipping caps, and how the trust and safety committe NEVER did or does anything about sellers charging exorbidant s&h rates in other categories even after being repeatedly reported.

It's also ironic that ebay claims they are trying so hard to clean up the site, yet the number of FAKE trademark items listed on the site is probably at an all time high. I'd venture to say 95% of the so-called licensed sporting apparel listing on the site is FAKE, as is the vast majority of Coach, A&F, Nike and many more famous trademark names being sold on ebay at a fraction of the cost of what legitimate retailers can buy real licensed and tradmark items for purchasing volume wholesale using legitimate wholesale supply chains.

Ebay doesnt care about buyer satisfaction or fairness to sellers....It's all about greed and their own bottom line and nothing more. All these smoke and mirror guestures that ebay cares about buyers and sellers is total nonsense. Not since J. Donahue took over anyway...Cash flow, profit margins and keeping their largest volume sellers content is all that dude cares about.

2008 Oct 10 11:42 AM