The “e” in eBay

September 9th, 2007

written by the Lively Prognosticator

When I got suckered in, I mean asked to write a blog, the first thing I had to do was select a subject. Initially, I thought to myself that I would keep it positive, and pick a topic where maybe I could give some great suggestions on how to increase effectiveness as an internet marketer. But a couple of mojitos later, I said naaahhh, what fun is that? So I decided to go for the gusto, pick a topic, and share my thoughts in a manner reminiscent of Bill Maher, with a little Geraldo Rivera thrown in. Not that I’m as witty or talented as either of them, but I gotta aim high, ya know?

Just a few more things about me before we get started. I choose to remain anonymous. I’ve been told by many naysayers that eBay doesn’t get mad, they get even. But many of you know me. I have been selling items in my category for over 25 years, using many different methods, including mail order, face to face sales, and ecommerce. For many of those years, I was also a senior manager for a Fortune 500 company. I’ve been selling on ebay for almost 10 years, and became a PowerSeller almost immediately. I’ve got a wealth of knowledge, and people often seek out my opinions on a variety of subjects. OK, enough said. Let’s get into it.

My first thought about eBay is that they have a business philosophy that is counter to the philosophy of every major corporation in the United States. Every major business in the country is built upon Customer Satisfaction. Mission Statements, Core Values and Corporate Philosophies are built upon the foundation of providing world class Customer Service, and treating the customer in the manner you would like to be treated. So how does eBay measure up? First off, who is their customer? Who put over $6.7 billion into their coffers last year? Well, let’s see, buyers don’t pay for membership or the right to bid, they pay eBay nothing when they buy something, and they pay zero when they use Paypal. Total cost to buyers for using and buying on eBay? Zip, nada, bupkis, nothing. How about sellers? They pay a listing fee whether the item sells or not. Then eBay charges extra for everything from Gallery to featured listing to store fees. Then the seller pays a final value fee if it sells, and pays another fee to Paypal if the buyer pays that way. So it’s pretty clear that eBay’s customer is the seller, who is putting almost all of that revenue into their pocket.

OK. Now we’ve established who eBay’s customers are. So how do they reward those customers? They’re rewarded by the “e” in eBay. eBay’s entire Corporate Culture is built upon these 4 “e’s of eBay:

Excessive Fees – If you are a seller on eBay, you don’t need to be reminded of the outrageous fees that ebay charges. But let’s do a quick analysis. A seller lists an item for $9.99, and it sells for the opening bid. He pays a 40c listing fee, a 35c gallery fee, a 53c Final Value Fee, and a 55c Paypal fee. Total fees $1.83 or 18.3%. But wait, it gets better! That’s assuming a 100% sell-through rate. Every time one doesn’t sell, you still pay that 75c listing and gallery fee. When a buyer doesn’t pay, you STILL pay that 75c listing and gallery fee. And if you use eBay tools, or selling enhancements, you pay, pay and pay some more. Stores cost money, listing tools cost money, other features cost money. And you can be sure that eBay is constantly looking for methods to increase their take rate. For example, there’s a promotion going on now offering free listing fees for a whole month. Why? Rumor has it that eBay will go the route in the US that they went in France. Force all listings to have gallery, and increase the listing fee. eBay NEVER reduces fees unless there is something in it for them. So while this is a great benefit for some sellers this month, enjoy it while you can, because come early 2008, it will be BOHICA (Bend Over, Here It Comes Again).

Extraordinary Attention to Wall Street Analysts – eBay spends an inordinate amount of time, energy and money courting Wall Street analysts to make sure investors will continue to be confident in purchasing and holding eBay stock. And while this is normal for any large corporation, once again, ebay handles this by going over the top in their effort. Stock analysts know that if their opinion is Buy or Outperform, or if they upgrade their opinions, there’s a good chance that Meg will be at their next investor meeting. If their opinion is Underperform, or even Neutral, Meg is usually previously booked, and unable to participate. And if they have a sell opinion, they probably won’t even be invited to eBay’s analyst briefings.

Extreme inflexibility – This is the large sellers’ biggest complaint. Large sellers are treated the same as small sellers by eBay’s Trust & Safety Division, who make business ending decisions, with little forethought, and strict adherence to rules. When eBay takes down an item, they generally follow a “three strikes and you’re out” format. Sounds reasonable, doesn’t it? NOT! They don’t differentiate between the seller who lists 50 items a week, and the seller who lists 5,000 items a week. This is not about the large seller generating more volume. It’s about the fact that in this case, the small seller had problems on 6% of his listings, and the large seller had problems on less than 1/100^th of 1% of his items. Or more recently, eBay decided that a neutral should be treated the same as a negative in terms of making decisions on whether to restrict a seller. While I agree that in some cases a neutral truly IS a negative, in many cases it’s not, and there’s no thought going into this. It’s just a “count up the numbers and do what the chart tells you to do.” I’ve had a number of situations where a customer bought something, there was something wrong with it, I immediately offered and issued a refund, and they gave me a neutral, with a comment stating that I took good care of them, and they’d buy from me again, but they didn’t get what they bought, so they didn’t feel I deserved a positive. You can’t levy penalties for every situation in exactly the same way. If we did this in the real world, we could eliminate our entire system of jurisprudence. A good thing by eliminating lawyers (Oh lord, do I wish), but a bad thing by not giving the accused a chance to state their case.

Every seller can be replaced – This is the final “e”, and I don’t think it needs much explanation. eBay has repeatedly set policies, taken positions, and conducted themselves in a manner that demonstrates a blatant disregard toward sellers. They are currently focused on the Buyer experience. They are also clearly focused on the stock, and the Wall Street experience. And you can bet their yearly bonus that they’re focused on their employee experience. The seller experience? Sorry folks, there’s just not enough resources to help you.

Experienced sellers are getting smarter and smarter. Many are having positive selling experiences on sites like Amazon and Overstock, as well as their own website. A recent survey of sellers by a leading financial institution found that approximately 80% of eBay Powersellers plan to do more of their eBusiness off eBay over the next 12 months. And this is not a particularly new trend. It’s only going to take one company, with the right concept, the right timing, the right philosophy to come along and put it together. You can bet your house on the fact that a Google or a Microsoft or a Yahoo will snap them up, giving them the financial background necessary to mount a formidable challenge to eBay. And when that happens, the sellers will move faster than warp speed. And eBay will have nobody to blame but themselves. It’s coming folks. Be prepared!

This is the Lively Prognosticator signing out. If you enjoyed my diatribe, please let the IMA folks know. If you didn’t enjoy it, please keep your thoughts to yourself or I’ll buy something from you just so I can leave a neg!

Entry Filed under: eBay