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June 26, 2008

2 new strategies to improve your DSRs

I'm cautiously posting this because every time I mention DSRs, I'm flooded with a river of anger in comments, but for those sellers that do want to improve your DSRs, I wanted to add two new strategies to our 12 tips for increasing your DSRS (now 14).

At ChannelAdvisor we spend a LOT of time working with sellers and helping them improve their DSRs and these two strategies come from those discussions, tests and results.

Here they are:

Improve your DSRs Tip 13 - Consider selling some DSR-friendly goods (or loss leaders)

One group of sellers we've had a hard time getting improvements to their S+H cost DSR are those sellers that sell heavy items (laptops, furniture, anvils, vacuum cleaners, etc.).  We had a caller on the webinar that was the embodiment of this challenge.  The caller is a computer seller (avg 10lbs - $30 S+H cost) and was shipping US only as we have advised and had taken into consideration all 12 ChannelAdvisor DSR tips, yet couldn't get the dreaded S+H DSR over a 4.5 (30-day).

One thing we've seen work is for people to start mixing in items that are almost guaranteed to have good S+H DSRs.  In this example, I'd say computer accessories would be good.  By mixing in some < 1lb items like mice, usb drives, keyboards or whatever - maybe even with free shipping on those items, the seller could start throwing some 5 stars into that S+H DSR to balance out the 1/2/3's they must be getting.  In some business models, it may make sense to lose $1-5 on these kinds of items to get your 'core' business into the golden 4.6/4.8 DSR range and achieve those FVF discounts and BM advantaging.  Imagine you sold 100 computers a month (ASP of $500). If you sold 200 items you lost $1-2 on ($400 cost let's say), but had great DSRs to get the 15%.

Cost of our "DSR juice" program: $400/m
FVF fees you pay:

  • 100*$500 =$50k GMV
  • Assume 10% take rate - FVFs are usually about 60% of that so 6% FVF, yields a FVF cost of $3k
  • 15% fvf discount: $450

Here you're ahead of the game (in this example) $50 on the discount ALONE. If you could get your conversion rate up 1-2-3% from BM advantaging that would be well worth it IMO.  I'd argue that you could run a program like this up to double the FVF credit and the program (boosted by BM advantage) would be huge.

Improve your DSRs Tip 14 - Consider NOT filing for UPI credits
I have to thank eBay Strategies friend AC for turning me on to this one.
This one is probably going to be controversial, but before you flip out, follow this logic.

Here's how it works from a buyer's perspective:

  • You said you'd buy something and didn't.
  • 7-10 days later the seller files a UPI claim against you
  • After that week, you get a UPI strike - the messaging around UPIs in the eBay help system and on the site are pretty nasty sounding. I'd argue it's as bad/worse than getting a negative feedback.
  • So what's your natural reaction - are you going to give that seller 5 stars?  Heck no, you are going to neg them and you are going to give them all 1's - take that you UPI-filing meanie-head!
  • If you were a real smart buyer what you would do is leave a positive and then all 1's -that's going to really hurt the seller because they can't get the neg expunged - the pos+1's is the most damaging feedback potentially to a seller in the UPI process.
  • eBay's help system tells you to go into the console and start doing stuff, if you do that then your feedback will stick and you will be able to dodge the UPI on your account.  Really a win-win for the buyer and well worth your time when you consider the downside (from eBay help docs):

Note: If a buyer gets too many strikes in too short a time period, their account will be suspended indefinitely. In some cases, limits may be placed on the buyer’s account in advance of suspension.

So as a seller if your DSRs are really important to you, then why risk them by starting this dance at all?  Sure it's eBay's fault the UPI process is so broken and all, but you do have the option to opt-out of it.  Sure, this puts more FVF $$ in eBay's pocket, but maybe you can take more out by opting-out and do what's right for YOUR business.

Here's an example of how this could pay off.

You sell 1000 items a month.  10% UPI rate (100 UPIs/month).  Let's assume 25% of those people 'burn' you on DSRs in there - so that's 25 '1 stars' you are getting from UPIs.  eBay doesn't publish or provide any transparency on DSR data, but let's assume a distribution like this for your 1000 transactions: (yes i know that only 75% leave DSRs, but let's say it's 100% for argument's sake):

5 - 745
4 - 200
3- 20
2 - 10
1 -  25

This yields:
3725 - 5 stars total
800 - 4 stars total
60 - 3 stars total
20 - 2 stars total
25 - 1 stars total
4630 total stars/1000 transactions = 4.63 DSR

Now you stop filing UPIs.  Here i've assumed a very generous UPI star distribution and taken most out of 4's, but some out of 3/2/1's: (now we have 900 transactions)

5 - 745
4 - 149
3 - 2
2 - 2
1 - 2

This yields:
3725 - 5 stars total
596 - 4 stars total
6 - 3 stars total
4 - 2 stars total
2 - 1 stars total
4333 total stars / 900 transactions = 4.81 DSR (the heaven's part and a beam of sun shines down on your head as you my friend are now on some DSR hallowed ground!)

Now you're saying, "Hmmm, ok he may have a point here, but what's the cost?!"

Let's stick with our example.  Let's assume this seller has a $50 ASP:

Situation1: seller files UPIs and gets a 4.6 DSR.
$50*1000 items = $50k and of course $10k of that never ships.  so the seller files for UPI FVF credits on that $10k.  Let's assume this seller has a 10% take rate, 4% is listing fee and 6% is FVF - so they get 6% back (yes this assumes a 100% success rate on UPIs which isn't the case, but stick with me) - so they get back $600/m in FVF credits.

This seller is at 4.6 DSR so they enjoy the fvf 5% discount.

 

Situation2: seller does NOT file UPIs and gets a 4.8 DSR.
In this scenario the seller does not get $600 in FVF credits.  However, they do get a 10% increase in cash back because they are now in the 15% 4.8 tier. Perversely that FVF credit is on a larger amount thanks to not filing UPIs so it is really a 11-12% difference, but let's stay with 10%.

10% benefit - (seller has $6k FVF) - $600 cash back.

So in this case (it's the 10% UPI rate that is doing this BTW), the seller is net neutral from a FVF cash perspective (e.g. instead of the $600 in UPI credits, they got an additional $600 from the discount).

BUT, and it's a big BUT.  They are now hyper advantaged in BestMatch and let's face it, you sleep better with a 4.8 vs. a 4.6.  A 4.6 is just 20 1-stars away from a 4.5 which is the path to being suspended for SNP.

This strategy will vary:

  • If you have a > 10% UPI rate, it could be more expense vs. breakeven.  If you have a < 10% then it could be very profitable.
  • If your UPI 'fee recovery success rate' is very low, then that will improve the profitability of this strategy.
  • If you do this and your DSRs don't move, you are hosed (I think this is highly unlikely BTW)
  • If you have an unusually high ebay FVF take rate (higher ASPs), do the math for your model. 
  • If you have a low ASP, this could really help you
  • If you have a low conversion rate (meaning more of your fees are in listing and not FVF), then the BM part of this will be killer positive for you.

I'd love to see some brave readers try this for 30 days and see what they experience.  I'm going to go out on a limb and say that if you did this plus our other 12, you could be looking at a 4.9 - definitely if you don't ship outside continental USA.

A word of caution...
Recently we're finding that TnS has an ever-expanding definition of 'Feedback manipulation' and some more creative/aggressive strategies are causing suspensions, so be careful how far you take these.  I can't possibly see adding some new products that your assortment could possibly be a violation, but be careful out there.  The one thing we have seen is suspensions for what I call DSR farming, which has two flavors:

  1. Creating accounts to get fresh DSRs - the seller creates a new ID every 30/60 days, or once the previous ID is 'tainted' (under 4.5 DSRs).
  2. Moving products around seller IDs - we had one customer suspended for life for taking some free shipping goods and moving them between 2-3 seller IDs to 'reform' the DSRs on those seller IDs.

Recap of the 14 tips

  1. Specify reasonable flat-rate shipping - the eBay shipping calculator is broken, do not use it, do not use zone based shipping (although best for the consumer, it is very broken on eBay)
  2. Highlight your shipping, return and other important policies ‘above the fold’
  3. Provide 2-3 shipping options CLEARLY spelled out (buyers like expedited shipping)
  4. Call out international shipping information –set expectations around time and customs, and other international ‘gotchas’.
  5. Provide a clear and easy to understand return policy
  6. Provide (and communicate) discounted combined shipping
  7. Keep it simple (if your shipping+handling section is over 10 lines, that's too much)
  8. Ship to US only? (or consider a dirty seller ID that is intl only)
  9. Amp up your customer service
  10. Consider free shipping as an option (doesn't have to be all products)
  11. Communicate, communicate, communicate - always mention 5 stars EVERYWHERE, do a package insert too.  Send buyers to 'www.leavingfeedback.com' to help them understand how this works and the impact on you the seller.
  12. Leave feedback first (use the words '5 stars' in there)
  13. Add DSR-friendly products to your mix, especially if your core business involves heavier/bulkier items.
  14. Consider not filing UPIs - depending on your CR, TR and ASP, this could be a big win for you.

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