Tony P.

Should eBay Go Retail?

Scot,

That 'growth' you speak of has a dark side. The pricing changes that ebay has forced upon the sellers, for the last year or so, accounts for that 'growth'.

With the ebay dictates to offer Free Shipping, sellers have rolled the actual shipping cost into the selling price. The 4% 'growth' stems from this practice.

In fact, a basic off-the-cuff accounting of the actual cost of shipping the GMV products that offer Free Shipping, but are not free, should be in the range of 6% to 10%. By my calculations, albeit hypothetical numbers, has ebay LOSING revenue this past quarter.

Ebay has now mandated that shipping insurance can no longer be a separate charge and it too, must be rolled into the selling price. This next quarterly report will include that amount within the GMV.

The 'growth' is artificial, not organic. Just like the growth from the past few years was not from increased sales and organic growth, but rather from increased fees. Growth, like a tick.

Amazon vs. eBay: 2 Charts Say It All

Besides gouging their customers for less service, there's another big reason that ebay is so profitable. They are putting zero effort, and expense, into selling THEIR only product - ebay, itself.

No expenditure for advertising! And their "reward" programs for current buyers doesn't count as marketing. Bribing former buyers to stick around, with coupons that have more exclusions and restrictions than a "free timeshare vacation", is not advertising.

I've seen more ShamWow commercials in the last month than all of the ebay commercials, ever. What, is an expenditure of $100K just too much for the mega-corp with $3 BILLION dollars? Sheesh!

I've even seen a Buy.COM commercial on cable network TV. Now, it wasn't much, mind you, but their name did flash onto the screen for about 10 seconds - white letters on a black background, with no sound. At least it was something!

Ebay is doing what it has always done, more or less. Resting on its laurels and riding the wave. That wave has hit a serious stretch of calm sea and ebay's lack of previous business acumen is the storehouse of knowledge upon which they now draw.

While they could have been learning about the ecommerce business, they were instead off Empire Building. If what they need to do now doesn't require a failed exploit overseas, acquiring an entity they themselves cannot develop or offering more *FREE* spots to other mega-sellers, then they have no clue.

That's what investors should really be concerned with - ebay mgmt blindly grasping at the fix du jour.

Amazon vs. eBay: 2 Charts Say It All

A more accurate measure of both companies' true worth and future profitability can be ascertained by considering where their respective Profit Margins are derived.

Amzn Profit Margin (ttm): 3.23% -- as a result of actual growth

eBay Profit Margin (ttm): 18.66% -- as a result of increased fees to its customers, amid negative growth

One has potential for sustainability; the other comes from a finite source. An ever-decreasing, bled-out source.

Amazon and eBay in Satisfaction Survey

Scot,

You've used the site since its heydays, you know that ebay has done this thing to Auctions, themselves.

For example, an upcoming "seller perk" is the inability of a non-payer to leave feedback. But, it's only going to be implemented for Fixed Price. ONLY FP.

Exactly what logical reason could be behind excluding auctions from that small degree of protection for sellers? There isn't one. And this is just one example of many more to come.

It's called Steering. Ebay is good at it, too. It's the MO behind the "paypal is the safest payment method" baloney. (aka vertical antitrust violation)

The categories enjoying the highest STR - coins, antiques, electronics - some hitting over 70% - do IT with auctions. That clearly shows the viability of the auction format - almost every dammed thing thrown out there is scooped up!

Meanwhile, all of the BIN/FP listings "enjoy" a miserable STR - most hover around 15-20% , with a high in the 30% range for just a couple of categories.

The only reason that FP constitutes appr. 60% of revenue is due to the volume of FP. It takes 25 FP listings to equal the revenue generated by a single auction listing, on average.

Just imagine how much better things would be if Auction sellers were to get a perk or two, every once in a while. While ebay does everything within its power to undermine the auction format, they run around with this perplexed look on their faces, claiming that auctions are dying.

No, they're not dying, not with a 70% STR rate they're not. JD is killing them and hiding the knife behind his back.

eBay: Where Did All the Fun Go?

I'm a follower of the "whatever ebay did, they did it for an ulterior motive" school of thought. Obviously. Some might say I need a tinfoil hat. No worries, I have one. :-)

My opinion above does contradict Ms Pat's - she says that ebay did it for the sake of it's users. I say that ebay has never done one dammed thing solely FOR its users.

Early on in the SMI (Safeguarding Member ID) phase, several suggestions were offered as alternatives. One was to simply abolish SCO and make an announcement of that fact.

(For the record, there were some sellers that didn't like the idea of abolishing SCO, but even they agreed that it would be a small sacrifice to pay, to keep bidder IDs from being hidden.)

OK, back on point. Guess what the T&S VP said about that suggestion? That it wouldn't work because users wouldn't know that SCO was abolished. say... WTF?

Present every user that logs-in with a splash page informing them of it. Send out an email to every registered user. Have a banner proclaim it on every ebay page. What would be so difficult about that?

"users don't read - they pay no attention to banners - they don't get half the emails sent" Lots of excuses. (note the contradiction about banners not being effective!)

Funny thing.. ebay used all of those methods to announce their new TOS Policy, didn't they?!

Back on point, again. Some think that ebay wanted to keep SCO because of the revenue it generated, but I have to ask if that amount made up for the loss of bids that followed SMI.

Either ebay had no clear idea what effect the SMI would have upon bidding - OR - they wanted bidding (and thereby auctions) to falter - OR - they're simply morons.


You may choose any three options. ;-)
(Philip, can I put you down for all three? LOL)

eBay: Where Did All the Fun Go?

Philip, I understand your point and agree with the dishonest nature of ebay's actions. I have read your AB post.

But (you knew one was coming, right?), I view ebay's actions differently. For quite a while now, they have acted, so as to cause a reaction. Look deeper within their action and you'll see their goal.

What would happen if everyone that uses ebay for auctions was to become fully aware of the scope and possibility of shill bidding? Auctions would die, correct?

Is that not what JD et. al. have been prophesizing all this time - the death of auctions? They want that. Or wanted it. Today they do, tomorrow they don't. Or vice versa.

They prolly view your ongoing mission as a plus in their favor. But I do understand your desire to educate others..

There's viable alternatives to the hidden bidder policy and you seem to be aware of that fact. Some of those alternatives would even open up auctions to the potential for more bidders, because quite a few experienced ebayers do know about shill bidding.

The amount of money kept from the site due to "shill bidder concern" is more than whatever money is gained by that shill bidding. It has to be - every seller knows that bidding has fallen off since hidden bidders was implimented.

A viable alternative would mean more bids, more money and more revenue for ebay. But ebay doesn't choose that route. Why do you think that is?

eBay: Where Did All the Fun Go?

I'm late to this party, as well. I got two good takeaways from this most-excellent article.

"But the real and simple reason is eBay is no longer fun."

".. and others, myself included, were all too alienated by eBay’s bureaucratic and political MBA culture."


Keith, believe it or not, that culture has gotten worse. It was what killed ebay 3.0 - killed by the Prez of Marketplaces. None other than the Donahoe.

BTW - I joined X-COM as a member in 2000. We were kicking the azz of ebay's Billpoint, weren't we? Good times!

Is eBay's Real Threat Amazon or Classifieds, or Both?

I'm late to this party, but I feel compelled..


Scot, you have it right. eBay's real threat is both Amazon and online Classifieds. And the recession. And high postage fees. And the fading novelty of auctions. And all the other factors that have been mentioned, for years now.

But add them all up and ebay should still be doing what IT did back in 2000 - making sales on an increasing scale. Except for one thing. Whatever factors IT had a hand in Creating.

IT drove many sellers to CL, and still does even today. IT drove many sellers to Amazon, and continues to do so. Those sites would have seen a natural influx over the years, that is true, but ebay created an unnatural stampede.

Not surprising to some, I'm sure, but I can find partial blame on them for the dramatic rise in Postal rates. Indirectly. Back in 2005 when the USPS started to see mega$$$, they let their opportunistic thinking get the better of them.

Ebay should have formed a partnership with their sellers and the USPS to keep rates down. Their (ebay's) influence could have made a difference, but they were off on M&A buying sprees and didn't give a dam about the Critical Mass.

That $2.6B frivolous expenditure will always remain as a moment when ebay could have done so much better than IT has become. IYKWIM. A pivotal point, pissed away.

Now it's the Noise's turn and they don't give a dam about ebay.

Suggestions for eBay 2.0

Indeed. Exactly. Precisely. Each and every point. Spot on.

in modern lingo..

WORD!

Suggestions for eBay 2.0

Scot,

Well done. Thank you for the effort. A few points need refinement ** , like the screw-sellers on local sale via Paypal w/no delivery confirmation, but all-in-all, well done!


From your lips, to the shareholders' ears. In this, I pray. Amen.



** No Featured listings/fees for ebay? Some categories basically require them, so as to get ANY sales. This is due to ebay's changes to those categories (and how they are searched), from more than 4 years ago. You are asking ebay to change things that they have knowingly been doing for a LONG time. Knowingly, willingly and with malice. You're asking for a lot of cemented-in-place changes, not just a little culture change. You do know that, right?

Amazon's Wheel of Growth

Scot, a couple of things. One, where you give ebay (negative) credit for driving "2-5% of the 20% growth" at Amazon, I think you are being very conservative.

Mid-year of 2006 was also when ebay called their sellers' products "clutter", and then raised the fees on that clutter. I believe that sent some sellers running to Amazon and, equally important, it poisoned the well.

Even those sellers that didn't immediately leave ebay for Amazon, looked elsewhere. Once they looked, they saw opportunity outside of the nest. Their eyes were opened and all because mama bird went on a rampage.

Another point that should be mentioned is what Amazon did around the time of the "Bezos napkin diagram" period. They invested heavily in infrastructure. So much so, in fact, that the Street was calling them nasty things and punishing their stock price.

Remember when the price fell to $24, plus change? That was because Amazon was spending more than it was bringing in. How could they be so foolish? What - did they have a plan? A *vision* for the future?

I've watched this thing play out for the past few years -AND- it could have been a different result -BUT- it isn't. I ain't saying that I knew exactly how it would look now, but it does still fit with how I perceived it circa 2006...

The story of the Ant and the Grasshopper. Guess which one is the Ant?

;)

eBay and the CEF

Scot, one more thing. Thank You!

Everything you wrote was very insightful and 100% correct; especially the viewpoints that you expressed of ebay's current problems.

It was a good mix of how an experienced ebay'er would view today's ebay and the amount of perplexity that a newbie would encounter.

With that *special* stockholder meeting coming up shortly, I certainly hope some of the Bigshots are reading your posts.

They would do well to consider what it takes for a former believer to become something of a skeptic.

eBay and the CEF

Scot,

Do you realize..

sellers have been saying these things for years
sellers understood, after a brief moment of thought, the repercussions of ebay's 2006-2008 actions
sellers knew that they would have to curtail their selection, raise their prices, accept the bent-over position for scammers and move inventory
sellers knew all of these things, more or less, and voiced their complaints to deaf ears

Scot, remember that DSR workshop you held on the ebay discussion board? Remember how heated it got? Remember how you and your workers answered those sellers that voiced *those very complaints*?

Your remarks were condescending and, basically, dismissive of any potential problems that might arise. That was the exact, same behavior as exhibited by ebay, towards the sellers' concerns.

If you can determine what caused you to offhandedly dismiss pertinent information from knowledgeable sources, perhaps you can help ebay overcome their elitist and repudiationist tendencies.


"My point is many of these policies make sense on the surface, but if you scratch just a little bit below you will see that they negatively impact things like value on the site." ~Scot Wingo

bravo. It took you 2 years to get *some* of what the sellers realized within a few days. But hold on, grasshopper, you ain't even near true Grok level, not yet.

Installment #4 will reveal what you think you know. It will definitely be interesting.

Introducing the ChannelAdvisor Ecommerce Framework

Scot,

Excellent info! The basic CEF framework is now copied and saved to a Word document for later reference. Thanks!

Where you state that it may be more practical to focus on 3 or 4 pillars, instead of all 5, I'm wondering if it is even possible to achieve all 5.

It would appear that Value (cost) has to be in a relationship with the level of service (Trust) that can be provided. Not to mention the ability to simply provide any of the Ease of Use and Merchandising (pillars) - to get those things onto a web site requires expenditure, initially and ongoing in some instances.

IOW - it would be darn difficult to be "all things, to all people". That would imply that the absolute necessities be provided - which, to me, are Trust, Ease, etc - and then do a pricing model to arrive at the basis for Value.

Anyhoo... I am wondering where you might place ebay when it comes to these two quotes from above:

(Trust)" Ads - Are the sites trying to throw irrelevant ads in your face so they make money vs. helping you find the products you are looking for?"

-versus -

(Merchandising) "Recommendations - Technology has come along to the point where ecommerce sites can offer very rich and relevant recommendations that add a lot of value to the buying experience."

Perhaps you'll visit that point in #3 or #4, yes?

(I know that you didn't mean to do "Recommendations" to the point of sending buyers off-site, but that is what ebay currently does, to the detriment of the sellers and, ultimately, to the majority of their buyers.)

Amazon vs. eBay: The Giants of E-Commerce Duke It Out

*Fixed price items are now 49% of GMV*

Amazing... after 2 years of ebay insisting that auctions are dying (and doing everything within their power to make that prediction self-fulfilling), the auction metric has indeed dropped.

In 2006, auctions accounted for 59% of GMV, now it is down to 51%. Ebay could place auctions at an even more disadvantage by simply not showing them. Oh wait, they already do that.

What a difference a little *embracing* would have made... we can only speculate. No one knows for certain, but doesn't all that implied sustainability simply cause you to wonder???


*Fixed-price GMV was down 2% y/y* *Auction GMV was down a whopping 26% y/y*

Whoa, are those numbers correct? You mean to tell me that auctions are down by that LARGE of a percentage, yet they still hold the majority position of the GMV revenue?!

Man, those auctions must command some pretty good ending prices to make that happen. Sort of like the boxer that ends up looking like Rocky Balboa, but still manages to kick the shiit out of the other guy.

Chant with me... *Auctions* - *Auctions* - *Rocky* - *Rocky* - *Auctions* - *Auctions*. Yeah, Adrian, we're down, but don't count us out just yet.


*... I'm quickly moving to the camp where many sellers are that the decline in auction GMV is largely self-inflicted due to the changes made in 08 to fees and finding.***

Yes. Glad you can join us, Brother Scot. Our worlds are typically very different (fp vs. auction), but there's some in your tent that prescribe to our way of life. Now you know their pain. It is, and has been for a long time, our pain.


*If times are tough or pricing competitive, they can rely on partners to compete on price with other retail venues and take their foot off the Amazon retail gas pedal. In other times, they can change direction (e.g. 2Q07) and surge on the retail part of the business.*

Yessiree, Amazon has found a way to have their cake and eat it too. Just not both, at the same time. A possible case study: "How to invite your competitors into your store, and thrive!"


*... it's a fact that the spread between Amazon and eBay is increasing and increasingly increasing (for you calculus buffs out there).*

Let's call it 'exponential' growth/death. And, there's one more bit of data that can actually hasten it, even more. Amazon is made up of mostly mid-to-large scale sellers. Ebay derives (according to their metrics) approx. one-half of their revenue from small-scale sellers.

If those small sellers get pissed-off enough to leave ebay, it's doubtful that the majority will go to Amazon, they will simply contribute to ebay's negative numbers. Therefore, Amazon may not rise up to meet ebay on their downward slope, but rather, ebay may take a nosedive straight into Amazon's numbers and continue to plunge.

You need to chart the level of displeasure of ebay's small sellers and factor-in the "new and improved": BM Search/Sort, My eBay, Listing Page (forthcoming) and finally, the entirely New Search Experience (also forthcoming).


Scot, I look forward to the remaining posts in this series!