eBay Strategies

Fun eBay Math - what does 1.4 million Cyber Monday transactions mean?

eBay reported last week that eBay.com saw 1m transactions on Black Friday and 1.4m transactions on Cyber Monday.  I've had a lot of people ask what that means and didn't have time until this weekend to really think about it.  It's always a good exercise and mentally stimulating to have a little fun with eBay math so I 'put a proverbial pin in it' and worked on it this weekend.

The questions generally ranged from - Why is eBay saying it this way?  What is the GMV?  This number sounds good, but is it?  Is a million a lot?

Some correspondents (usually skeptical sellers), believe that eBay is being 'cute' by reporting vague numbers that can be changed as they are not concrete.  For example, even the word transactions is somewhat "squishy" - is that an actual paid for item? What if someone buys 2 items, is that one transaction or two? Heck in the world of compsci, a search is effectively a transaction.

This post assumes that what eBay is talking about when they say transactions are actual paid-for items, one per customer (pretty typical on eBay given there's no 'cart' system).

Missing data points / assumptions made in this post.

To answer the questions the 1m and 1.4m transaction/day datapoints raise we have to do some calculations to determine how this relates to the daily rate of transactions and what-not.  Unfortunately there are several datapoints that eBay doesn't provide regularly needed to compare these numbers to those that eBay does provide, but we can make some educated guesses at these.

First, eBay doesn't tell us the number of transactions the site processes in total.  However we can calculate that from GMV if we know the average selling price (ASP) per transaction because (transactions * ASP = GMV).

For this article, I assume that eBay's ASP is $45.  This is what the ChannelAdvisor data shows (ex-vehicles) and I have read other reports that end up right in this range.

Second, eBay doesn't report the split of GMV (or transactions) across geographies.  They do however report the split of revenues and I believe that to be a safe proxy.  eBay's revenues are 45% us-based and 55% non-domestic.  We'll go with that split in this article. 

With those 'plugs' in place, let's see what this data means.

How many transactions does eBay process on a given day?

Before we measure the scale of the 1/1.4m numbers, we have to understand the normal transaction volume on eBay to establish a baseline.  Unfortunately as best I can tell, eBay does not release transaction data, but they do release GMV data and other elements we can use to back into daily transactions.

If you go to Q3, you find that eBay's global GMV was $12.2b for the Q (ex-autos).

So using that we end up with $12.2b / 90 days = $135m in GMV/day. If we divide $135m by $45 ASP we get 3m transactions on any given day on eBay globally.

All of eBay's PR around Cyber Monday and Black Friday has indicated 'ebay.com' which means US, but they didn't mention if autos are included or not.  All of my math thus far has excluded autos.  Honestly at the transaction level, eBay doesn't sell enough cars (in the thousands) to move the needle on these, but I wanted to point that out for clarity as it could cause the numbers to be slightly apples and oranges.

If we then use the 45% split applied to the 3m transactions/day globally , then we arrive at 1.355m transactions/day on average on eBay US in Q3.

The results are... disappointing?

If that math is correct, Black Friday's 1m transactions were actually 25% below average and Cyber Monday was a paltry 3% above average.  Of course our assumptions could be off here, but they'd have to be off pretty significantly to change these results.  Also they are based off of real-world datapoints so they are far from guesses.

The biggest variable out there is eBay's definition of transaction.  They did base these neat heat map things on this data and I looked at that and best I can tell a transaction is a single sold item.

One last area if discrepancy I can think of is UnPaid Items (UPIs).  UPIs are unique to eBay and the scourge of sellers.  Essentially a buyer can start a transaction on eBay and not pay very easily.  I believe that eBay counts UPIs in GMV (GMV is not complete/paid transactions) and maybe they don't include those in transactions.  The average UPI rate runs in the 10% range (but swings wildly as high as 30% for some) for our customers, so it could be that transactions exclude UPIs and GMV includes UPIs which would cause my numbers to be off by about 10%.  In other words  the 1.35m transactions based off GMV are actually 1.2m 'paid-for' transactions. 

eBay and the Holiday sales period.

If we assume the data is right and eBay didn't have a special Black Friday or Cyber Monday, then is that cause for alarm?  Actually, I don't think so.  I've already mentioned some of the headwinds eBay faces due to the change in the Bing cashback strategy.  Also, for the years I've followed eBay they always are more back-end loaded vs. other online retailers during the holiday period.  My educated guess is that eBay becomes the go-to marketplace when inventories for various items online/offline sell out.  Usually eBay's sales peak around mid December where-as last year, the peak for online retailers ex-eBay was around Cyber Monday.  So eBay has plenty of running room over the next two weeks to completely crush that 1.4m transaction mark.  I'd fully expect them to have a day that was near double that before the end of the year.

What do you think?

eBay strategies readers - do you think eBay was being clever with this metric to make it seem significant when it wasn't or do you think my calculations are off?  Sound off in comments.  I'll update this post if I learn anything new on the topic or if eBay clarifies their definition of a transaction.

Seeking Alpha disclosure - I am long Google and Amazon.  eBay is an investor in ChannelAdvisor where I am CEO.

November, Black Friday, Cyber Monday Same Store Sales

The ChannelAdvisor November Same Store Sales (SSS) are in and there are some interesting trends to look at.  As a reminder, at ChannelAdvisor our software is used by over 3000 retailers to manage a variety of channels including Search, Comparison Shopping Engines and Marketplaces. These SSS results compare the month of November 2008 to the month of November 2009.  It's important to note that this year Cyber Monday fell in November vs. last year Cyber Monday was in December.  As one of the top (maybe THE top) selling day in the Holiday period, it's placement can/does skew the monthly numbers.

• ChannelAdvisor over-all - 12% - down versus October's 17%
• Amazon  - 70% - Up over October's 61%
• eBay: - 3% - down from October's 4.73%
• Comscore - I believe Comscore has said they recorded a 3% increase y/y.

Here is what the data looks like when trended since January:

Black Friday SSS

In this section, we compare the single day of Black Friday 2009 and Black Friday 2008 to see what trends emerge.

• ChannelAdvisor over-all - 18%
• Amazon - 73%
• eBay - -8%

Cyber Monday SSS

As with Black Friday, in this section, we compare Cyber Monday 2009 with the SSS of Cyber Monday 2008.

• ChannelAdvisor over-all - 13%
• Amazon - 70%
• eBay - -7%

SSS Observations

Overall it looks like this year the trend of promotions driving earlier shopping behavior is continuing.  It will be interesting to see if Cyber Monday is the largest day of the year this year.

Amazon continues its massive share gains and all data points to an acceleration in November. 

The eBay decrease in SSS isn't cause for alarm, but is curious given the performance of other channels.  We did some research and came up with a couple of contributing factors behind the decline:

• Many of our largest m/m and Q/Q gainers on eBay have been with ChannelAdvisor for less than a year and are larger retailers focused on fixed-price on eBay. They are generating huge GMV via eBay's deal of the day program, but they are not in this data as they were not 'live' a year ago for the comp.
• Last year during the key Black Friday week, eBay and Bing (well, Live back then) partnered to deliver a staggering 20-30% cashback.  This year as previously highlighted, they moved from 8% to 10% for Black Friday - Cyber Monday and now appear to be back to 8%.  Bing's popularity has soared and while last year 20-30% was very impressive, this year, 10% is a standard and 20%+ is interesting to consumers.
• Comscore and others are reporting a significant dip in eBay traffic for November.  I checked compete.com and generated the following chart:

You can see that according to compete.com, eBay has declined from 73m unique users to 70m from August to October.  it will be interesting to see if November continues the trend.

What are you seeing?

eBay Strategies readers, what kind of holiday results are you seeing?   Let us know in comments.  We'll be reporting weekly results approximately every Tuesday for the next three weeks, so stay tuned!

Seeking Alpha disclosure- I am long Amazon and Google.  eBay is an investor in ChannelAdvisor where I am CEO.

What Cyber Monday looks like for a mid-tier retailer - (-or- a truckload of beads)

At ChannelAdvisor we have over 3000 customers that are all involved in internet retailing. We generally put them into categories that are pre-defined by Forrester research:

• Enterprise - Usually name-brands that are primarily click and mortar companies, but some pure plays.  They are usually doing $100m online GMV annually.
• Mid-tier (or midsize) - Some name brands are in here, but mostly these are interesting niche companies and up and comers that are too big to be called small, but too small to be called Enterprise.  Their sales are in the $10-100m range.
• SMB (small business, small/medium business) - With sales < $10m this group may seem insignificant, but in our experience a lot of SMBs become mid-tier and many mid-tier become enterprise.  So in the world of e-commerce you can't just dismiss someone because of size - they could be the next eBags or CafePress or Zappos.  All of those companies started as SMBs and matriculated up the tiers to the top.

Interacting with companies across this broad spectrum is one of the most fun aspects of what we do at ChannelAdvisor.  We literally will be on the phone with Wal-mart one minute and then talking to a mid-tier retailer about strategies to diversify their channels and then talk to Joe the sporting goods SMB person that wants to hone their eBay-only strategy.

I mention all of this because there are lots of stories out there about the Enterprise players, but unfortunately the mid-tier and SMB online players don't get coverage.  There are occasional local news pieces and Internet Retailer tends to dip down into the mid-tier, but the mainline press on e-commerce is usually all about Amazon, eBay, Walmart.com, etc.

There was a great piece in the NY Times yesterday that was more of a how-to that featured one of our mid-tier customers, Sophiasstyle.

In an effort to shine a bit of a spot light on what it's like in the mid-tier, I thought this was an interesting picture-inspired story to share.

Cyber Monday at a mid-tier e-commerce company

We have a customer, beadaholique, that is in the bead/craft/DIY space.  Their story is interesting, but not unique at all - we literally have hundreds of customers that have followed this roadmap which makes them a great case study of how an eBay-focused SMB can become a multi-channel mid-tier player very quickly.

Here's the inspiration for this post - check out this picture taken at Beadaholique on Tuesday morning right after Cyber Monday.

 

You can make out 4-5 people rushing around and see a bit of their storage bins in the back.  The subject of this photo though is that stack of paper there in the foreground.  That is their Cyber Monday orders printed out to go in the shipments and to help with pulling/pick/pack/ship.  That's one order per page and it took them 7, yes 7!, reams of paper to print out the orders.  This is Beadaholique's biggest day ever by a long shot and sets them up for not only a killer holiday, but all of the customers they have acquired will give them the ability to really crush it in 2010.

How did Beadaholique get here?

For all of the readers out there with e-commerce aspirations, you don't just open up shop online and get 7 reams of invoices on Cyber Monday... It takes a lot of time, patience and strategy to get there.

Beadaholique started from $0 on eBay and found a ready-made audience for their products.  They used eBay to really understand the bead niche - what products are buyers looking for, what are the best sources, what are the best prices and how do you build the back end to support > $100k/m sales.  How do you list and manage 10-20k SKUs?  Once they got their business ramped up on eBay they realized they needed to diversify to decrease risk in their business and also get to the next level.

They then expanded to Amazon and those sales ramped up quickly.  Finally, they really spread their wings and opened up their own e-commerce site where they leverage search and comparison shopping.  The e-commerce site gives them a platform to offer items to their long-standing customers and they are very active with email marketing as well.  Finally, they've recently launched on Buy.com - completing what we call the marketplaces hat trick!

Are you diversified?

One of the coolest things about their business now is the level of diversification. Beadaholique has nailed the diversification game.  Jim Cramer has a segment on his show called 'Are you Diversified' - obviously from the stock market standpoint.  I've always thought it would be interesting/fun to do this for retailers.  Every day we run into online retailers who are 100% eBay or 100% Amazon or 100% search.  Then they hit a rough spot on that channel and it can easily cause a serious problem.  Also when you are well diversified a plethora of strategies open up across your business that help with scale.

Beadaholique was nice enough to allow me to show you some graphs from their account that I thought you would find interesting.  Here we see at a high level that they have a healthy 45% e-commerce, 55% marketplace split:

 
 

Drilling into the marketplace side here, you can see further diversification (the store is the same with search/cse):

 

Here you can see Amazon at 52%, eBay at 47%, and Buy.com at 1%.

Those charts are a 30 day diversification view.  Here you can see the time series of sales as well as diversification:

 

In this chart, the red is their e-commerce site, the next two bars are eBay FP30 and auction and the bottom bar is Amazon.  This is a great chart as you can see the power of diversification right there.  If they were eBay only or Amazon only or e-commerce only, they wouldn't have had nearly the impact of having all of the channels hitting on all cylinders.

Conclusion

There you have an in-depth view of not only what it's like for a successful mid-tier internet retailer on Cyber Monday, but also a bit of the back story on how they got there and how diversification has played a key role.  eBay Strategies readers - tell us your Cyber Monday stories in comments, send us your pictures and definitely think about your diversification strategy!

SeekingAlpha disclosure - I am long Google and Amazon. eBay is an investor in ChannelAdvisor where I am CEO.

John Donahoe on CNBC

JD was on CNBC yesterday talking about online sales and mentioned they sold 1m items on Sunday.

I thought readers would enjoy this video:

Upcoming conversations with Wall St.

For the Wall St. readers out there, we have three events on deck around the topic of Holiday sales trends:

• Merrill/BofA - 12/1/09 - 10am ET hosted by Justin Post
• Goldman Sachs - 12/4/09 - 11am ET hosted by James Mitchell and the GS Internet team.  We'll have eBags and some other retailers on this one.
• Citigroup - 12/9/09 - 11am ET, hosted by Mark Mahaney.

At each event we'll have some new data to present and I'm sure the holiday season is going to take some interesting twists and turns which we'll be sure to report on.

If you are a retailer and want to listen in to any of the calls, feel free to contact Delisa Reavis @ ChannelAdvisor - delisa.reavis@channeladvisor.com and we'll get you the information.

eBay's change in Holiday promotional strategy between 2008/2009 - will it work?

I was reviewing last year's Black Friday and CyberMonday results and trends and noticed some interesting differences in eBay's strategy between 2008 and 2009.

2008 - A Cornucopia of Online Promotions...

Last year, eBay's Holiday promotional mix was best described as heavy online promotion. They partnered with Microsoft to offer up to 30% off on Bing (Live back then) cashback.  On top of that eBay flooded the marketplace with a ton of coupons (10% off $100, free ship, etc.)

2009 - Back to TV (Come to think of it....)

This year Bing bumped up from 8 to 10% cash back for CyberMonday which may seem decent, but compared to last year is paltry.  Last year, eBay was one of the only merchants in Bing Cashback, this year the program is very robust with hundreds of merchants and many of them offering 15% or more, so eBay actually feels under funded in that environment.

 

eBay doesn't seem to be running any major coupons that I've seen either.

However, while eBay has pulled back from cashback and coupons, they are running TV spots and interactive media like nobody's business.

One idea of why they would change strategies is maybe they evaluated the Q408 strategy and found it to be more cannibalistic (giving discounts to folks already going to buy on eBay) vs. incremental (new buyers).

eBay is a no-show for CyberMonday :(

I did a comprehensive survey this morning (CyberMonday morning) and pretty much every online retailer ran some great CyberMonday promos: Walmart.com, Amazon,com, target.com, toysrus.com, buy.com  - you name it, they were running strong CyberMonday promotions, highlighting great gifts, etc. Here's what eBay was running this morning: (click to enlarge)

 

You can look at this page with a microscope and you won't find the words Cyber or Monday and certainly not CyberMonday anywhere.  eBay is really missing the boat IMO by not joining with the rest of the online retail world and doing something special on this day.

Conclusion

We're watching the data closely from BF and CM to see what early holiday shopping trends we are seeing - eBay Strategies readers, what are you seeing?  Do you think eBay's focus on TV vs. Online promos is the right strategy this year?

SeekingAlpha disclosure - I am long Google and Amazon, eBay is an investor in ChannelAdvisor where I am CEO.

eBay pop-up shop and some videos

eBay took over some real estate in the heart of Manhattan on 57th for a pop-up store.  When I first heard about it, it sounded kind of weird (eBay in a store?)  I haven't had an opportunity to visit the store yet, but I've talked to some that have and they said it's actually pretty cool.

Fox business has two videos that highlight the store. Unfortunately they don't seem to have an embed function so I've linked to them.

In this first video, there's an eBay apparel seller, Linda's Stuff (Linda Lightman) talks about the store and her eBay business.  You can see the apparel part of the store pretty well in this one.

In this video, Lorrie Norrington does an interview on Holiday top sellers from the pop-up shop.

Enjoy the videos and if you happen to go to NY or have been, let us know what you think about the shop in comments.

SeekingAlpha disclosure - I am long Google and Amazon.  eBay is an investor in ChannelAdvisor where I am CEO.

 

More details on eBay's search outage - buyer and seller compensation announced.

Sellers had three concerns coming out of this weekend's outage:

• Is eBay going to be stable for Q4?
• What about the buyers that were impacted?
• What about the seller impact?

Is eBay going to be stable for Q4

According to AB posts and comments in the press, it looks like the outage was due to a software problem that eBay has found and fixed. Evidently a 30% surge in listings caused the problem to rear its ugly head.

What about buyers that were impacted?

eBay is giving all buyers (winners) of auction-style items a 10% off coupon - this is the first time I've ever seen eBay do anything like this and I imagine it will turn this negative to a positive as now we'll have all of these buyers with unexpected 10% off coupons during a key purchase time.

eBay seller impact/compensation

eBay sent a letter to sellers Monday that detailed the compensation they are providing for the search outage. In addition to the normal listing/fvf fee reversals, it was great to see eBay not only give sellers the ability to cancel sales (auction-style listings) and be inoculated from any negative feedback reactions caused by that.  As you will see eBay even gave sellers some sample language should they want to cancel the sales.

Kudos to eBay for expediency and for acknowledging the severity of the outage.  Fingers crossed that we won't have any issues in the next 30 days!

BEGIN eBay's letter to sellers

Dear XXXX:

By now you might be aware that between 9:45am and midnight PST on Saturday, November 21, eBay search was down with searches returning limited or no results.

We know this is a very serious disruption, especially as you are ramping up your sales for the holiday season. Because you had listings ending during or within an hour after the outage, I wanted to let you know, personally, what we will be doing to support your business and protect your eBay reputation.

First of all, this outage will not negatively impact your feedback or detailed seller ratings (DSRs) in any way. All auction-style listings completed during this time will be protected from negative and neutral feedback as well as DSRs below a five star rating.

In addition, we will not expect you to fulfill Auction-style orders completed during this time if you feel the search outage prevented you from realizing the full expected price from your auction-style listings that closed during the outage or within an hour after the outage. It's up to you whether you want to fulfill the item in the interest of good relations with your buyer or cancel the transaction.

If you do plan to cancel a transaction, we ask that you contact your buyer within the next 48 hours (by end of day Tuesday, Nov 24). For your convenience, we've drafted some language below that you can use in your emails to inform the buyer of your intention and let them know this cancellation was due entirely to an eBay issue and not you as a seller.

If you had Fixed Price listings completed during this time period, you would of course be expected to fulfill sold items as usual.

Second, in keeping with eBay's outage policy and doing what's right for sellers and buyers, we are taking the following actions for listings that ended during or within an hour after the outage (9:45am Saturday - 1:00am Sunday PST):

• We will refund all associated fees for Auction-style listings and refund pro-rated fees for all active Fixed Price listings during the outage. This refund should be reflected in your next eBay invoice.
• We will remove negative/neutral Feedback and detailed seller ratings (DSRs) lower than 5 stars given by buyers for affected Auction-style listings.
• We will alert the eBay and PayPal resolutions team in the event that a claim of item not received is filed for an affected listing.
• We will be sending a 10% coupon up to $100 off to buyers who won Auction-style listings during the outage for any inconvenience.

We fully understand the impact of an outage of this scope on you, our valued partners. We sincerely apologize for the disruption to your business. I want you to know that we are continuing to focus our teams and resources to ensure a smooth and rewarding holiday selling season for you.

Sincerely,

Lorrie Norrington
President, eBay
___________________________________

Suggested email for notifying your buyer of cancelled Auction-style transactions:
Dear Buyer:

As you may know, for a period of time from Saturday, November 21 to Sunday, November 22, eBay search was returning limited or no results. See the official eBay report. Unfortunately, the item you purchased from me on [date] was offered through an auction-style listing affected by this technical disruption.

I wanted you to know that as a result of this issue, I am cancelling this transaction and any payment you made will be fully refunded. In addition, eBay will be sending you a 10% coupon up to $100 off for the inconvenience. Now that eBay search is fully restored, I will be relisting this auction [today]. I sincerely hope you will bid again-and win!

If you have any questions, please do not hesitate to contact eBay via the "Contact us" link at the top of the eBay homepage. Thank you for your understanding. I look forward to your future business.

Sincerely,

END eBay's letter to sellers

Seekingalpha disclosure - I am long Google and Amazon.  eBay is an investor in ChannelAdvisor where I am CEO.

eBay global outage - search system down globally most of 11/21/09

Around noon ET we started to get some inbound requests from sellers asking about the status of our systems because of unusually slow order flow.  Everything was fine on our end.  We realized that eBay's search system was having instability and ultimately a hard outage.  You can follow the official eBay Announcement board here for details.  At the time of writing, it looks like we're going on a 6hr+ outage here.

The problems manifest themselves in zero search results like you see here.  It's interesting that eBay chooses this behavior instead of a page saying the site is down.  You'll notice that the sponsored listings and other advertisements are all doing just fine.

 

This is a bad buyer experience IMO because it makes it seem like eBay has zero (ipods, xbox, etc.)

There was a similar, but shorter outage last in in October.  There are four general buckets of problems that will impact a search engine like this:

• New software has bugs - Hopefully they haven't rolled new software this time of year, but if they did it would be a likely culprit.
• New hardware causing problems - Perhaps they slipped in some last minute new hardware that is having problems
• Existing hardware problem - Search engines require lots and lots of storage and lots of machines to hold the indexes and serve them quickly.  There's a lot that can go wrong in there. eBay invests heavily to make sure they don't have any Single Points of Failure (SPOFs in our world), so I doubt this is it - it would have to be pretty massive to see the impact we are seeing here.
• Existing software/system  bug/corruption - As the holiday sales period ramps up, software systems are put under pressures they don't see in other time frames. This can cause hidden bugs and problems to pop up. 

Judging by the hint given in the AB post - "errors in our  backend systems", I'm going to go with the 'existing system bug' theory, but it's all speculation at this point until we learn more.

One thing is clear, this doesn't give anyone in the eBay ecosystem confidence that the site will be up and robust for the critical next 30 day prime time holiday selling period.

Impact on sellers

Sellers are asking us if there will be some form of compensation from eBay.  I believe eBay has to declare it an outage first and then they automatically extend listings 24 hours as compensation.  You could theoretically argue that this isn't an outage as the front end of the site is up.  That's an empty argument as it's like saying your car is starts fine even though it has four flat tires.

The 'extend listings 24hrs' thing is a kick back to the auction orientation of the site and doesn't really apply to today's fixed price world where a days worth of sales have been effectively lost and extending listings won't bring 'em back.

Speaking of SPOFs, we've been guiding sellers that putting all of your eggs in one basket isn't prudent.  Today is one of those days that amplifies that message for eBay-only sellers.

What's the impact on you?

eBay Strategies readers, did you experience the outage?  What was the impact on your business?

SeekingAlpha Disclosure - I am long Google and Amazon.  eBay is an investor in ChannelAdvisor where I am CEO.

Interesting article on the risks eBay faces leaving its roots...

I've often argued that if eBay leaves its roots and becomes essentially a fixed-price mall that competed squarely with Amazon, that they may lose that battle. The key is if they can do both - keep the unique and quirky stuff while adding in the fixed-price stuff.

Anthony Mussucci has an article over at Daily Finance that you can find here, that nails that view better than I have been able to.  Here's a snippet that I found very succinctly summarizes what I think most of us in eBay-land feel and worry about:

The more eBay morphs into an online retailer and gets away from its roots as an online auction site, the more likely it's fighting a battle it's going to lose. While it's important to establish trust among sellers and buyers on eBay, trying tocompete with Amazon or Walmart and their online guarantees is a waste of time. Even if eBay can match the services offered by other retailers, why would a buyer chose to shop there? 

EBay's strengths are in the variety of old, hard-to-find collectible and discounts on new items. That's why people shop at eBay, and if the company moves too far away from that core identity, it may never rediscover its mojo.

SeekingAlpha disclosure - I am long Google and Amazon.  eBay is an investor in ChannelAdvisor where I am CEO.