Looking at eBays DSR (Detailed Seller Rating), part 2

written by Steve Grossberg, IMA President

Back in September 2007 I posted to this blog, a piece titled “Looking at eBay’s DSR (Detailed Seller Ratings), Click Here to Read Part 1.

Yesterday I did a podcast interview with Ina Steiner from AuctionBytes, Click Here to Listen To Interview Some of the points and more I am going to be talking about below are covered in the interview. I encourage everyone to listen to the interview.

Okay for starters ebay says 15% of sellers currently qualify for the 4.8 DSR bonus. My question is what percent of the ebay listings or GMV does that represent. This has yet to be answered by my best guess is somewhere less then 2%. Of the top 100 seller date as referenced in post 1, there is only 1 of the top 100 USA based sellers according to the Nortica 500 that has a 4.8 DSR is shipping and handling. There was another 19 who had 4.6 or better. Ebay stated over and over how 66% of sellers have a 4.6 or better but again what percent of listings and GMV is this? Certainly it is not 66%, so always do you own due diligence. As the old saying goes trust but confirm.

A few days back I posted my own personal math on reviewing the situation now confronting sellers, and if it made sense to go after the 4.8 DSR.

I caution everyone to look at your own economics. Remember if you obtain the 4.8 DSR on all 4 you get back 15% of your FVF. Look at me for example.

Items listed 40,000
Items Sold = 8,000
ASP = $14

So $14 x 1.23 FVF x 8000 items = $9800 FVF paid

$9800 FVF paid x 15% discount = $1470

$1470 savings divided by 8000 items = 19 cents per item

So in essence I have to say to myself will a 19 cent reduction in my shipping and handling move my DSR from 4.4 to 4.8? The answer is heck no it will not. Even if it did the ebay discount is not guaranteed as it is a 30 day rolling average and some months I may get it and some not.

However I could simply raise my shipping and handling by 19 cents and guarantee my bonus that is equal to eBay’s bonus offered for obtaining all 4.8’s. I am not suggesting sellers raise shipping and handling fees and I am not indicating I am raising my own because I am not. However I am point out that ebay is not providing enough incentives to sellers here and putting the entire burden of fixing the problem on sellers. So in summary I would think most sellers would be best doing the math as I showed above for their own sales and evaluating whether it makes sense to lower your shipping and handling to strive for a 4.8.

I do not think anyone knows what the affect these changes will have including ebay themselves. My inclination here is to say run your business the way you always did and let the DSR’s fall where they may. We as sellers have very little control over DSR’s but we do have control over others aspects of our business such as

Remember ebay talked about other sites on the internet offering free shipping and handling etc. However they failed to talk about the ebay buyer mentality and the fact merchants here must offer their products much cheaper then anywhere else on the internet as buyers expect bargains on ebay. They also mentioned how buyers complain about shipping and handling after the fact. But are they complaining about total cost? I doubt it very much. I know when I sell a pokemon diamond nintendo DS game for $24.99 on ebay that I paid $28.50 for wholesale nobody is complaining about product price or even total cost. So the ebay buyer wants items at or below wholesale cost and want to be charged exact postage. Amazon offers prime members free shipping and handling and sells this same game for $35.00. My price on ebay with shipping and handling is $33.00. I cannot sell it lower and now ebay took another 83 cents of profit away from me leaving me with a whopping 2 cent profit per game if I had 100% sell through.

Ebay also made it clear if a seller is accurate in the description and sets clear expectations of what is being offered, then that is what is expected. So if your shipping and handling is clearly stated who cares what buyers think after the fact? I did all I could do and clearly stated what is being offered and for how much. I did not click the mouse on the other end and place their bid or hit the buy it now.

Now let’s talk about non paying bidders here for a minute. Ebay spokesperson Usher Lieberman has confirmed to the associated press recently some date I provided and that is 6% of ebay listings end up with NPB. Several times during the recent ebay e-eomm forum ebay folks stated 7 million items were listed to the site daily. So let’s do some math here.

7 million listings daily x 6% NPB = 420,000 NPB daily.

420,000 x average list price 70 cents (my guess here) = 294,000 dollars made DAILY on NPB. Multiply this out for a year and ebay brings in over 100 MILLION DOLLARS IN REVENUE FROM NON PAYING BIDDERS. That equates to nearly 2.5% of the total ebay company profits .

Forget about the re-listing credit ebay offers on NPB re-lists, as it means nothing unless you have a 100 %sell through rate (would that be nice, even a 30% would be nice)

So where is there an incentive on eBay’s part to stop these non paying bidders? How much does amazon or wlamart.com make on NPB? What is extremely disturbing here is that ebay also allows these same NPB leave us negative feedback and give us all 1’s on DSR. But wait, ebay says if a buyer does not respond to UPI or is suspended feedback will be removed. So then I ask does ebay back retroactively and re-calculate our DSRs from a time in history to see if we would have qualified for the bonus discount based on DSR rating after removals, and then provide us the discount?

What I mean here is let’s say in June you have a 4.5 shipping and handling DSR. In August, say you get 30 feedbacks removed because of suspended buyers. The feedbacks that were removed were left in June. So once the feedbacks are removed if ebay went back in time and looked again at the DSR for that June 30 day period your DSR would have been 4.6 on shipping and handling, does ebay now pay you the would have been June discount? I sincerely doubt it. So I see this as more spin. In essence the feedback removals will never help your current 30 day roiling DSR period so what good is it?

Now let’s look at eBay’s broken dispute console. Ebay says they will remove feedback if buyer does not respond. Okay almost everyone responds though. Quite often they select a standard response ebay offers via a check mark which reads “buyer indicates they will pay for item”

Well the buyer indicated that 15 days ago when they won the auction. Fool me once shame on you, but fool me twice shame on you. I immediately close these disputes and get my FVF back (not listing fees). Guess what no feedback removal because buyer responded.

Here is yet another issue, at least for media and some other sellers who list via catalogue. Lets frame this part by saying during the e-comm as the finding 2.0 break out sessions ebay folks hammered home the fact if cataloged listing (UPC) is available it is essential we use it.

So a few days ago I received a neutral feedback on item number 140201873682. God only knows what DSR I got because they are invisible to us. The feedback left reads as follows, “product is new, but only 1 person can play. It said 2 can play, huh” Well in the media category you list items for items specifics using UPC code. Ebay then has a data provider called Muze who provides detailed information about the item.

Additional Information about Fishermans Bass Club; Portions of this page Copyright 2001 – 2008 Muze Inc. All rights reserved. Players: 1-2 Players

Now even though this content is totally controlled by eBay and Muze, they cleverly attach a sellers user name to the bottom as follows: The seller, 1busyman, assumes full responsibility for the content of this listing and the item offered.

Also there is no way to even know the data ebay is providing via Muze is flawed as sellers cannot possibly go verify all eBay’s data. Additionally the only way to report bad data is in the SYI form and who uses the SYI form? I have not for 10 years now. So once again ebay is placing all the burden of fixing their issues onto the sellers.

Yet another issue in International shipping. Yesterday my ebay sales were analyzed and 30% of my items ship were to International destinations and it represented over 15 different countries. With 15 different countries customs and duties policies buyers have to deal with how can I control shipping time? Also if shipping time is long rest assured buyer will ding you on shipping and handling fees because any item taking a long time to receive will surely not be worth the price paid to ship in buyers minds.

In summary while eBay’s intentions appear be good with the recent changes announced, it will never work in my opinion. The only way to get sellers to lower shipping and handling fees would be for ebay to drastically lower the cost structure for sellers to sell on the site and bring back the buyers from yester-year. The fee changes only offered fee relief to about half the sellers at best. Fee relief would be needed to nearly 100% of the sellers and meaningful fee relief like a 20-30% reduction.

The next step would be for ebay to collect payments on behalf of sellers. But wait if ebay did this they would lose the 100 million in NPB revenue.

6 comments February 3rd, 2008

Is It Wise to Just Wait & See With Ebay?

This is a question that most full time Ebay sellers will be asking themselves over the next month or two. The “best match” finding 2.0 changes to Ebay’s default search in March 08, and the May 08 removal of a sellers “mutual feedback” privileges will cause unknown changes to many Ebay sellers bottom lines. (I am leaving out fee changes because they can be calculated.) I know of one seller locally who has already closed his doors, and started selling off his inventory. He felt it was too big a gamble with three small children to continue counting on Ebay as his sole source of income. Buy out companies have been quick to take most of his stock of brand new Budweiser mugs off his hands.

If you use Ebay as a part time source of income, you will probably be OK waiting to see how your income changes. For sellers who have made a full time commitment of resources and time to build a business on Ebay, the wait and see approach will probably not work. I personally have two building leases, and several buyers who depend on me. Not to mention year long advertising contracts that cost quite a bit each month. For me, waiting to see what happens to my Ebay income isn’t going to work very well. I have to plan for the worst, and hope for the best.

I plan to sell off as much inventory as I can this month, and stop buying additional stock until I see how “Best Match” is going to change my sell through rates. I have also created a selling account on Amazon. Amazon has a very vital marketplace where you can usually sell your items at a higher price than you can get on Ebay. Amazon has no upfront fees, handles the payment processing (no paypal fees), and the final value fees are 12% to 15% which is just slightly higher than Ebays new fee changes. But Amazon handles more of the customer service tasks, and there are no listing fees. For more advice on selling through Amazon’s marketplace see the IMA forum. For more information about the differences in selling on Amazon vs. Ebay try this link.

There are also niche marketplace websites if you are selling in a collectibles category. Many niche marketplace websites have also seen a surge over the past year in sales, and sellers. The best way to find them is through collectors newsletters or the IMA forum.

For all the Ebay sellers who face extreme business changes over the next few months, I wish you the best and hope all your planning in the next few months bring you a better overall marketplace experience for the coming year.

Jennie

1 comment February 3rd, 2008

eBay Fee Changes… Look At Your Own Numbers!

written by Steve Grossberg

Anyone who lowers shipping in my own opinion, is foolish. Look at your own economics. Remember if you obtain the 4.8 Detailed Seller Rating on all 4 you get back 15% of your FVF. Look at me for example.

Items listed 40,000
Items Sold = 8,000
ASP = $14

So $14 x 1.23 FVF x 8000 items = $9800 FVF paid

$9800 FVF paid x 15% discount = $1470

$1470 savings divided by 8000 items = 19 cents per item

So in essence I have to say to myself will a 19 cent reduction in my shipping and handling move my DSR from 4.4 to 4.8? The answer is hell no it will not. Even if it did the ebay discount is not guaranteed as it is a 30 day rolling average and some months I may get it and some not.

However I could simply raise my shipping and handling by 25 cents and guarantee my only bonus better then the bonus ebay will pay out. Also remember this will not affect you in search unless DSR is 4.2 or lower. So ebay is not providing enough incentives to sellers here and putting the entire burden of fixing the problem on sellers. So in summary I would think most sellers would be best doing the math as I showed above for their own sales and raising your shipping and handling to provide you the same bonus or better then the 4.8 would have got you.

So ebay sellers, please look at your own numbers!

1 comment February 2nd, 2008

Welcome To The New Ebay Neighborhood. Will you be my Friend?

Last month I signed up as a member of the Better Business Bureau (BBB). One of the reasons I joined is they allow you to use their emblem on your website. They also don’t let any random person file a complaint against you without documentation of a transaction, and without giving the store owner a chance to refute the complaint.

Why do they do this? Because they do not want to hurt a persons business. A lot of investment goes into a business. Especially a true solid physical store front. You have contracts that last for years with other vendors. Security systems, utilities, advertising, product, etc. If your business goes under, a lot of other businesses are affected. In addition, if someone publishes false negative information about you for the public to read, they could be sued for defamation of character.

Why would I make these comparisons? In May 2008 Ebay plans to let anyone post negative information about my Ebay business without any regard to how it may affect that business. As far as I know, I will be given no chance to refute any negative information that a buyer leaves me, and that negative information will remain there for anyone to read for 12 months.

This would be comparable to someone picketing outside my physical store for 12 months without my being able to do anything about it. Is this fair? Ebay thinks so. They think that if a buyer has a negative experience in any way in my “Ebay” store, that the buyer has the right to harm my business for 12 months without giving me any hearing or even reviewing the facts. They feel it is the same thing as the bad word of mouth a physical store owner receives from a buyer who has poor buying experience.

The difference is that a buyer who has a bad experience in a physical store isn’t allowed to publish defamatory information about a store to a public forum without proof, or they are left open to a libel suit. The BBB knows this, and reviews all complaints. So welcome to Ebays new neighborhood where anyone is allowed to post negative information about a business, without allowing a store owner any rights. Perhaps Ebay management feels that an Ebay store owner has nothing invested in that Ebay store, or no obligations to other people with businesses?

All I know is that I hope I find more friends than foes in the “new” Ebay neighborhood starting May 2008.

Jennie

Add comment February 2nd, 2008

The eBay Flip Flop

Wasn’t it just 2 years ago that eBay wanted to bring back the “vibrancy” to core by encouraging 99 cent starting bids? In 2006 they decreased the listing fee for the 99 cent starting bid while increasing the costs for eBay store listings. eBay felt the need to go back to their roots – the auction format.

So it was with shock that I read the new fee structure. eBay’s 99 cent auction sellers are no longer the darlings of eBay. They have been hit the hardest by the new fee structure. Because the traditional 99 cent auction sellers generally have a very high sell through rate, they are being hit hardest by the large increase in Final Value Fees.  Although their insertion fee has decreased by 5 cents it’s nowhere large enough to make up for the 3.5% increase on the backend.

Yet Fixed Price sellers, who generally have a low sell through rate, have seen their insertion fees decrease greatly, especially the majority who use gallery.  They still pay the increased FVF, but the decreased insertion fees will more than make up for the increase in FVF’s for those seller with sell through rates below 50%.

I call this the “eBay flip flop”. Just like a politician, eBay can’t make up their minds if they want to be an auction site or a fixed price site. They tried to have a separate format for fixed price, ie eBay Express, which has been such a failure that it is being discontinued in the UK.

When did eBay make this sudden turn to woo Fixed Price sellers? Was it in 2007 when they noticed Amazon’s third party marketplace suddenly grow by leaps and bounds? eBay started getting worried that they were losing market share, not auction market share, but Fixed Price market share. This seems to have come as quite a surprise to eBay management. Suddenly they realized that Fixed Price listings make up 40% of all listings. Yet sellers are flocking to sell on Amazon.

In order to compete with the Amazon Marketplace, it appears that eBay has decided to throw their true auction sellers to the wolves and woo back the Fixed Price sellers. Yet this does not seem to be a very good long-term strategy. Has eBay not noticed all of the niche auction sites? There are auction sites for baseball cards, shoes, liquidation items, etc. What are you going to do eBay? Wait for these niche auction sites to take away your true auction sellers and then do another flip flop in order to woo them back? At least one very large traditional auction seller is seriously considering either starting his own auction site, or negotiating with other auction sites to move all of his auctions and customers away from eBay. It’s been done successfully before, and it will continue to be done until eBay gets a clue and starts treating these two formats differently.

What will it take for eBay to realize that pure auctions and fixed price listings are two different animals that require different fee structures? They seem to understand now that there are buyers that prefer auctions and there are buyers that prefer Fixed Price, yet they still charge the same fees for both.

I say this because I was recently thrown into one of eBay’s search tests. My results were shown in two columns, one with Fixed Price listings and one with Auction listings. This is a good start, but does not go far enough. Different fees should be charged to recognize the differences in selling in each format. If eBay doesn’t realize this and make this needed change, they will continue to lose their large sellers. Last year they lost Fixed Price sellers, this year they will lose large auction sellers.

Why different fees?  Because the needs of Fixed Price sellers are different than true Auction Sellers.  Sellers with multiples of items need lower insertion fees so they can afford to list all of their items at all times.  Let them pay for success – when an items sells.  eBay has started to “get” this.

However, true Auction Sellers have close to 100% sell through, so why penalize them for  selling by charging such a high back end fee?  Charge them a higher insertion fee, since you know their item will sell, and lower back end fees.  This will encourage the auction sellers to stay and to list higher value items at lower starting prices which will encourage auction buyers to stay on the site and continue bidding.  The auction buyers are the backbone of eBay; by chasing away the true auction sellers, eBay chases away the auction buyers.  And that is bad for every eBay seller.

Cyn

Add comment February 2nd, 2008

Ebay ‘08′ & 3 Stages of Major Change! Will Your Business Survive?

This week Ebay announced several major changes to their platform that will go into effect over the next 5 months. The first change starts February 20th and will affect Ebay fees. The second change comes in March 08 when ebay makes “best match” the default search, which I beleive includes “finding 2.0″. The third change is planned for May 08 when Ebay will restrict sellers mutual feedback privileges.

It is impossible to tell how the overall combination of changes will have affected the majority of Ebay sellers 6 months from now, but some guesses can be made about the impact of each individual change and anyone who is concerned will find many more discussions on the topics on the IMA member forum. The initial opinion of some IMA members is that the fee increases will cause a 0-25% increase in fees. Twelve members have stated their overall fees will decrease. The sellers who estimate a decrease are those with a lower sell through rate (10-40% sell through), and a typical selling price between $1.00 to $25.00. Those hardest hit on fee increases typically have a high sell through rate, and higher average sale price. The Auctionbytes blog has a very good article where numbers show everyone’s fees will increase.

The second major Ebay change will occur in March 08 when all categories default search will be changed to “best match” or “finding 2.0″. Some sellers with low DSRs and a high level of buyer dissatisfaction will begin to place lower in search starting in February. It is impossible to tell how best match will affect sales. I personally saw a drop in sell through from a high of 40% to a low of 5% during the weeks when Ebay was testing the best match algorithm in unrelated categories. I suspect it was due to buyers confusion with the new search, and possible glitches with the overall finding mechanism on Ebay during these tests. My sell through would increase as soon as the search returned to normal. The “best match” algorithm is below:

The third major phase of changes is scheduled to begin in May 08 when Ebay takes away seller’s right to participate fully in “mutual feedback”. Sellers will only have the option to leave positive feedback while buyers will still be able to give negative feedback. This dynamic creates an “Amazon” like atmosphere for feedback. Sellers who sell on both Ebay and Amazon have reported that their feedback on Ebay is 100% positive, but their feedback on Amazon is anywhere from 78% to 98% positive feedback. So the future of 100% positive feedback on ebay looks bleak. Unfortunately, there have been no announcements about whether the powerseller requirement of 98% positive feedback will be changed accordingly, but there are rumours that Ebay will be watching closely and change the requirement if they think it is “needed”.

I tried to find some Amazon sellers feedback to compare, but I couldn’t find the seller feedback displayed anywhere. There is apparently very little emphasis put on feedback for Amazon sellers. Which is unfortunately not true for Ebay. The sellers most susceptible to having this change hurt their business would be those who sell luxury items where buyers need to be able to trust the seller’s reputation before they buy a gold watch, or vintage diamond ring. The sellers least hurt will be those selling a large amount of items with lower selling prices. Buyers don’t care about negatives if the price is right on low dollar items.

There are a multitude of perks being given to powersellers if they keep their 30 day average Detailed Seller Ratings (DSRs) up, but none of those will matter if their overall positive feedback dips below 98%. So it isn’t worth spending the time discussing.

The reason Ebay gives for taking away sellers participation in “mutual feedback” is an increase in sellers leaving buyers negatives after the implementation of DSRs in combination with the buyer dissatisfaction suspensions in April 07. Many sellers suddenly found out that if 5% of their buyers left them negatives/neutrals their selling privileges would be revoked (I say suddenly because it was overnight for many). Ebay representatives told them to approach the buyers and ask for a mutual withdrawal. Unfortunately, most buyers won’t consider a mutual withdrawal unless they also have a negative to remove. Ebay also made neutrals count as negatives without giving sellers any warning. So, a lot of Ebay sellers desparate to save their livelihoods starting leaving negatives for buyers who left negatives/neutrals. Ebay says the number of buyers leaving the site because they got a negative has increased 4x since Apr 07.

Oddly enough, I went through my feedback for the last 90 days and found that the buyers who are no longer registered either were non-paying low feedback buyers with multiple negatives for not paying, and/or buyers with 100% positive feedback whose accounts had been highjacked so many times they felt safer closing their account until they decided to buy again.

Whatever you sell on Ebay, one of the changes listed above is going to affect you. A very good description of the affect on different selling styles is given by Scot Wingo on his blog with comments from some ebay sellers. And another great interview by Ina Steiner can be found on the Auctionbytes blog. Pay particular attention to the question Ina asks at the end about whether Ebay is going to begin offering the same type of customer service Amazon does since the fees charged are now very close.

Jennie

1 comment February 2nd, 2008