nadine

Major Changes Announced by eBay: Part II

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.

eBay's Earnings a Successful Bid for Market Leadership

eBay.com GMV down 11% yoy excluding motors. That excludes the worst of the economic conditions and foreign exchange. It's still down double digits. Marketplace revenue down 18% yoy. When Amazon reports today, remember that Amazon lives in the same macro environment as eBay. Amazon is taking market share away from eBay, plain and simple.

How many excuses for mismanagement are you ready to believe? When eBay decided over a year ago to back away from being an online auction house, its core brand, in favor of becoming a me-too Amazon, all this was foreordained. Given the choice between a bad imitation of Amazon and the real Amazon, sellers will take the real Amazon every time. Better profits, better service, fewer hassles across the board.

eBay Offers Something Amazon Cannot

To the author: Check the revenue and earnings trends for eBay. The trend is not your friend.

Donahoe squandered much of eBay's good will and market share on an ill-conceived campaign to compete with Amazon. Even the analysts on Wall St can see that this effort has failed. Donahoe is now trying to backpedal into something that will work for eBay and obfuscate their failure; that's what all the blather about "secondary market" is about. However, believing that auctions are obsolete (despite still providing half eBay's GMV), he has not yet attempted to support them, even though they remain at the core of eBay's Marketplace business. The Marketplace business will continue to flounder until he returns to supporting the eBay core brand. The most you can say about eBay's latest moves is that they have stopped actively running off sellers. Now Amazon just pulls them away with better service and results.

eBay: Where It Stands, Where It Should Be Headed

ebay has been strangling auctions for four years now - changing the site to downplay them, raising their fees, even insulting them by saying that nobody likes them anymore. Then they use the increased fixed price numbers as proof that auctions are on the decline.

Auctions are flourishing in the real world and should be flourishing on line if they were properly managed. eBay just turned against them when they became fixated on growth above all else. eBay should put this cash cow out to a good pasture and let it give milk. They are destroying the foundation of their brand by trying to become what they are not.

Shares of eBay Hit Seven Year Low

In both the townhall and investor conference, JD spoke several times of the need to raise trust on the site for "users". However, it is clear from the context that the only users of the site he is solicitous of are the buyers on the eBay site. He is not at all solicitous of the sellers on the eBay site.

JD has turned selling on eBay into a minefield for sellers, and all you can say about the company's judgment is that good sellers are less likely to step on a mine than bad sellers. But when any seller steps on a mine, whether for some cause or in total innocence, that is 'too bad, so sad' for him, because eBay provides no appeal and no customer service to speak of. They also provide no customer service to the buyers they claim to be solicitous of, interestingly enough. Their customer service, in practical terms, consists of demanding that sellers provide the buyers with Nordstrom service at Walmart prices, while paying high fees to eBay.

Considering that sellers provide the lion's share of Marketplace and Paypal revenue, while buyers provide NONE, this is an extraordinary example of a company refusing even to acknowledge who its paying customers are, let alone catering to their needs. This creates a hostile and unsustainable business environment. Wall Street is only now catching up to what eBay employees and sellers have known for several years. But this management listens to neither.

Suggestions for eBay 2.0

The need to address the issues that Scot discusses is becoming so acute that probably not even the current eBay management will be able to avoid it altogether. So I predict some plan rolled out with fanfare that amounts to about 5% of what Scot suggests. If you notice from previous changes, eBay is actually rather timid about changing the base structure of the site (why is there STILL no shopping cart?) so probably 'the plan' will just involve splitting auctions from fixed price with different default sorts. Griff is already making noises to this effect. But really dropping fees? (as opposed to raising them and calling it a decrease, as if we were all too stupid to run the numbers) or really understanding what selection means on the site, and how they have to address it? I wouldn't hold my breath.

User 363989, if the benchmark for Donahoe's removal really is $8 / share, we shouldn't have long to wait. Less than four dollars to go. I can only wish.

How to Fix eBay

coyotebait,

At some point the stock price will indeed be too low, if only as a takeover candidate. There must be many smart people at Microsoft and Google thinking about possibilities. But where and when, I could not venture to guess.

How to Fix eBay

The author wondered why the drop ship eBay retail store is not ubiquitous. The answer is: eBay's fees are too high and its buyers too few these days. Five years ago you could do it. Now you can't. If eBay switched to free listings it might become possible again.

How to Fix eBay

coyotebait, eBay does tend to inspire rage for the following reasons:

a) until five years ago they really were a community site, and advertised themselves as such (another early advantage they completely wasted), so the change to big-corporation greed fostered feelings of betrayal

b) they have been acting so capriciously, esp. in the last year, really hurting people in the pocketbook for no good reason and making it impossible to plan

c) they cut special deals with the new "Diamond" sellers without offering any volume discounts to their existing large sellers (now there's a real customer "disloyalty" program)

d) as icing on the cake, they have insulted their paying customers (the sellers) by insisting that the buyers, not the sellers, are actually their customers who must be protected from the untrustworthy sellers, leaving the sellers - who pay ALL the fees for every transaction and who provide ALL the goods are services as a kind of indentured servant subject to Master eBay's whims.

Put these four points together, and you will see why sellers are not only leaving eBay in droves, but doing so with cries of "Death to eBay corporation!"

Even those who are staying have diversified and cut way back. like Jonathan Garriss, Executive Director of PeSA, who now does only 10% of his business on eBay according to a recent interview. Mr. Garriss is a large volume seller whose business ought to have fit in comfortably with a new fixed-price eBay, except that he was an existing seller and he couldn't get volume discounts.

eBay's behavior defies every common sense rule of business self-interest. I suppose you have to be a Harvard MBA and an ex-Bain consultant to think you have no need to listen to your customers or keep them happy because you know better. This management must go.

Some Advice for Business-Challenged eBay

A very well reasoned piece. However eBay management won't listen because management has a major-league attitude problem. They think they know better than everybody, including their paying customers. They are trying to stifle the dissent by incrementally firing their current customer base and hiring a new customer base. Unfortunately for them, it seems that the first part of that plan is working better than the second part.

Any business that mistakes its customer's customers for its own, and its own customers for indentured servants, as eBay has done, definitely deserves to be called "business-challenged."

What Will Become of eBay?

If auctions were simply "losing favor" in the marketplace, then eBay could have worked years ago to accommodate the switchoever to fixed price. Sellers naturally want to go wherever the market is. Instead, they keep trying to manipulate the sellers into fixed price deals that offer high margins for ebay and no margins for sellers. Thus sellers of all sizes are diversifying to other channels. eBay is only cutting margins to do deals with big sellers like Buy.com, on whom it will come to rely more and more. Of course, eBay won't have the leverage with the big sellers it does with the small ones, so we can expect a margin squeeze.

Meanwhile, the auction business struggles on, on a degraded platform full of glitches with far too many changes, all of which are designed to help the fixed price business and not the auction business. eBay originally tried developing the fixed price business on a separate site, but it failed, so now they are jackhammering the original site.

Analysts: Stop watching the listing numbers. They are meaningless. eBay can manipulate them at will. Watch the traffic numbers and the margin numbers. They tell the true tale.

2008: The Year eBay Lost Its Mojo

The November Nielsen ratings are out. For the first time, Amazon has passed eBay as the most popular shopping site on the web:


Culminating a long stretch in which the two companies’ traffic numbers have been heading in opposite directions, Amazon.com passed eBay.com in November as the most popular retail destination on the Internet, according to Nielsen Online.

Amazon.com, No. 1 in the Internet Retailer Top 500 Guide, attracted 57.7 million unique visitors last month, up 8% from last year, while eBay’s audience of 55.4 million was 6% lower than during November 2007.

Here are the top 15 retail web sites in November, with unique visitors in millions this year and last and the percentage change.

* Amazon, 57,682, 53,630, 8%
* eBay, 55,438, 59,041, -6%
* Wal-Mart, 39,420, 35,003, 13%
* Target, 35,902, 34,611, 4%
* Best Buy, 22,138, 22,736, -3%
* Sears, 19,541, 17,805, 10%
* Dell, 17,058, 18,918, -10%
* JCPenney, 16,933, 15,929, 6%
* Circuit City, 16,609, 19,135, -13%
* Netflix, 13,538, 11,954, 13%
* Kohl’s, 13,257, 10,516, 26%
* ToysRUs, 13,041, 13,726, -5%
* The Home Depot, 12,169, 10,608, 15%
* Overstock.com, 11,812, 18,419, -36%
* Kmart, 11,713, 8,693, 35%

Unique visitors count only once each shopper who came to a site, no matter how many times the shopper visited. This is a custom list compiled by Internet Retailer of the top e-commerce sites in this category based on Nielsen Online data.
www.internetretailer.c...

eBay's Weakening Bid

Probuyer, the number of auctions listed is very misleading. You have to understand what is causing it.

First, eBay artificially increased the number with Buy.com's and other "diamond sellers" listings (Buy alone has over 500,000). Those new diamond sellers don't pay listing fees so there's a hit to revenue. Then in September they instituted the new Fixed Price 30 format, which brought millions of pre-existing Store listings into eBay Core. Medved only counts Core listings. The FP30 listings do bring more revenue than the old store ones 35 cents/mo as opposed to 5 or 10) but the total fee varies. For electronics and computers it's cheaper than in Store, so those listings have moved en masse and their fee burden is somewhat lower. The complaining you hear is from the rest of the sellers, whose fees have gone up.

In sum, those higher listing numbers do NOT represent a higher revenue stream for eBay, and are easily manipulated and touted to ignorant analysts (but I repeat myself). Don't be fooled.

Big eBay Developments: Layoffs, Gobbles Up BillMeLater

Good comments, User275566. Ebay won't just have BML revenues to add to their Paypal operating segment. Don't forget the ever-useful "one time acquisition charges" which is used as a kind of cow catcher for all corporate expenses during a big M&A. Tarts up the bottom line wonderfully, when half your operating expenses can be explained away as one-time occurrences.

Yup, finding nice stories to tell The Street is eBay management's true expertise, no doubt about it. But in the current environment, even that won't save the stock. Will it save John Donahoe's job come January? Time will tell.

Why eBay Needs Shipping Cap

<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.