eBay Marketplace's Changes Are, Overall, for the Good

| About: eBay Inc. (EBAY)

This week saw many changes at eBay's (NASDAQ:EBAY) flagship marketplace ebay.com. And as with all changes to fees and policies, certain groups benefit more than others. So while it's no surprise to see mixed reactions, it is always important to focus on the ecosystem as a whole. Lets look at the major marketplace changes around the four areas of pricing, seller standards, feedback, and search - for a full list see eBay's announcement board. Note these changes are for the U.S. site only. Other marketplace sites have also introduced similar but country-specific changes.

Pricing (effective February 20th)

Two big changes. The first is the much rumored rebalancing of fees with lower insertion fees and higher final value fees. The second is making gallery absolutely free. CEO John Donahoe made it clear the net take-rate for eBay will actually drop on a like-to-like basis, so regardless of how anybody spins the announcement, for the marketplace as a whole, this is a fee decrease. But much more important, it better aligns eBay's fees with seller success.

Of course, there are a few categories that benefit more than others. In particular, some low ASP sellers, that don't use gallery in the first place, may actually feel disadvantaged by the changes. But overall, I think these pricing changes are a big positive for everyone - eBay included.

Seller Standards

eBay is making the minimum standards for selling on the site more stringent. A small percentage of the poorest sellers will have to deal with decreased listings exposure in search, and will be forced to offer PayPal or a major credit card as payment options. There will still be a place for this type of seller, just not top, front and center as it has been in the past. Again, while some sellers, who risk falling into this category, will certainly complain, the overall community will benefit from increased customer satisfaction.

There will also be a tougher requirements to qualify as a PowerSeller and very significant discounts and benefits for
PowerSellers. Again, expect a few PowerSellers that are about to loose this title to complain (a lot) - but overall, if the PowerSeller mark is to be meaningful and something to aspire to, this is a very important change.

Feedback (effective May)

This is possibly the most controversial change at eBay. Going forward, sellers will only be able to leave positive feedback for buyers (at the seller's option). At first, this may seen completely irrational. But eBay has good reasons for doing this.

First and foremost, eBay wants feedback to be honest. In its current form, buyers are discouraged from leaving negative feedback for fear of retaliatory negative feedback. And when retaliatory feedback happens, it not only puts the buyer off the seller, it puts them off eBay as a whole. So in this respect, the change is positive and frees buyers to give honest opinions.

Some sellers have complained buyers can now hold them 'hostage' and make unreasonable demands. This sounds extreme to me but, in any case, it is the same for all buyers, so the relative ratings still become more meaningful within the ecosystem. And on top of that, eBay is taking a number of steps to protect sellers from inaccurate feedback.

Search (effective March)

Best-Match is going to become the default sort method site-wide in March. This is a massive change that I have covered in the past. The difference this time is that eBay has specifically said that since it started testing it as a search option, it has seen that Best Match helps buyer conversion more than any of our other sort methods. This is excellent news for everyone (myself included) that doubted the effectiveness of Best-Match. This is also more evidence that eBay is moving towards a fixed-price environment.

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