eBay mega-changes day 3 - Wall St reaction and some 'deep thoughts'...

I'm still gathering feedback from sellers, the exec summary is that confusion abounds and sellers are having a hard time digesting the implications of the changes and specifically the fee changes.  I hope to have time to do a more lengthy post on that this pm.

Today however, I wanted to focus on the Wall St. view of the changes and some deep thoughts.

Wall St and eBay's changes
Not all of the analysts have chimed in, but as you'd expect the bears view this as vindication the model is broken and bulls are cheering  that the company is making progress on moving towards more CPA vs. listing fee model. Most analysts are concerned that here we are in September basically and the buyer experience hasn't materially improved yet.  Thus eBay is looking at a potentially disadvantaged holiday season vs. other retailers (they mean Amazon when the say this IMO).  Mark Mahaney nicely summed it up here:

Fee Cuts Only One Part of GMV Growth Turnaround Equation - Earlier fee cuts this year have yet to produce the desired effect of GMV growth acceleration, and site improvements made last year have not translated into an increase in traffic or conversion rates. We remain concerned that this raises the open question of whether eBay has perhaps "waited too long" or is structurally challenged given rising eRetail expectations/requirements. While the emphasis on fixed-price may improve growth picture for one side of the marketplace, we continue to believe the auction side of the business will be an anchor on overall GMV growth.

There's lots of fear around the effective take rate going down.  One analyst (James Mitchell @ Goldman) cleverly calls out eBay as being somewhat duplicitous on this:

eBay states that the basket of changes “does not impact the guidance we have already provided to Wall Street”, while providing three case studies of sellers who will pay it 11%-35% less.

His conclusion is that eBay must have baked a decrease in take rate into guidance which is what most analysts are also concluding.

All that being said, the market reacted with a resounding thud with the stock dropping from $25.5 like a rock towards $24 in the first two days which could indicate that the market is worried about the financial implications.

I'm a CNBC junkie and I found this video segment particularly interesting from FastMoney during pops and drops (eBay was a drop).

If you are on feed, the commentator basically says: "While Meg Whitman could be our next VP, the company simply doesn't work.  They are Amazon's weak little sister."  Ouch!

Did eBay's announcement/PR push actually help Amazon?
This brings up an interesting angle to think about.  By tacitly admitting publicly and some would say coming out swinging at Amazon (media pricing), yesterday eBay educated lots of people about Amazon's 3P business that I don't think knew much about it before.  I had several reporters ask for more information about Amazon's marketplace business and much of the press refers to the changes as the "Amazonification" of eBay. I'm not sure that's really where eBay wanted to position this, but with a microsite called "the best place to sell online", maybe I'm wrong.

Also listening to NPR, they got it all mixed up and said "the auction site eBay has changed prices to compete with other auction sites..." (there really aren't other auction sites - we're talking marketplaces here).

This leads me to the deep thoughts (queue the music) part of the program...

Deep thoughts
I try to keep an eye on what ex-ebayers are doing and stumbled upon this really interesting post by Adam Nash (currently at LinkedIn).  It's a ode to eBay Express which eBay plans to pull the plug on soon as revealed in the latest announcements.  Adam was the team lead for EE so it's interesting to see his thoughts on how the team came together, etc.  In the post Adam puts some great perspective on EE and how even back as early as 04 eBay knew they had a problem and was trying to address it via EE.  He laments that Amazon has a 3-4 year lead on eBay in this field now.

I was reminded by a joke we used to have for EE we had at ChannelAdvisor when EE first launched ribbing its mixed up brand message.  We used to compare it to something like: "diet oreos" or any other wacky brand we could think of (Green Hummer?).

This brings up the deep thoughts:

• Consumers don't want auctions, eBay's auction biz is stagnant/shrinking. EE was an admission of that in 2004
• Most consumers want convenience+value, some will trade convenience for more value (auctions), but they are diminishing as more options that don't force that tradeoff online exist (amazon, newegg, zappos).  They are buying more and more fixed price on eBay even though eBay did everything it could from mid 06-early 08 (with the exception of EE). 
• eBay has been in denial about this for 4yrs (04-07). I remember sitting in eBay Live 07 when Cobb was talking about Windorphins and the old 'mall and chain' and how auctions are exciting again!  (Read this post for example).  Everyone that knew anything about eBay's financials was shocked that they would go this route. 
• Auctions can't be revived.  They will always be there and useful, but they are saturated at this point and not growing.
• Many sellers blame fixed price for killing auctions, this is wrong, it's buyers that don't want to buy this way.
• Thus eBay HAS to embrace and succeed at the fixed-price marketplace game or look at something drastic like spinning out skype+paypal and selling off the auction biz.
• Unfortuantely , this path eBay is forced down leads them right into Amazon's crosshairs.
  • Amazon GETS retail because they are a retailer (number 1 BTW)
  • Adam points out that eBay didn't know anything about retail during his tenure and none of the new management team has a retail background and to my knowledge there's not a big 'let's be a retailer' movement at eBay.

All of this leads to my main point: eBay's brand dilemma.

To thrive, and some would say survive, eBay has to be the winner in the battle royale of fixed-price marketplaces. 

However eBay's brand is synonymous with:

• auctions (remember NPR?)
• flea market experience (hunting for hard to find items)  Note that this is not the same as selection. Most people don't think - I need a blue size 3e new balance shoe -surely eBay has that.  Now if you need some collectible, eBay is first.
• To some extent 'fraud', or at least 'risky'.

Amazon's brand is synonmous with:

• buying online (of course fixed price)
• selection
• Safety
• Low shipping (Prime)
• Cutting edge (kindle, unbox and in geekier circles 'ahem', web services)

I'm starting to think that eBay's ability to change that brand perception is going to be the REAL deciding factor in this whole thing.  They can fix finding, fees and fraud.  But new excited buyers won't be coming back until eBay can convince them that this is a different eBay. With 10 years of auction, auction, auction baked into this puppy, that is going to have to be one heck of a campaign and it ain't "Shop Victoriously".

To achieve this, as I think through it, eBay almost has to throw auctions under the bus to send a hard message. Imagine an ad with this script:

Dear valuable inet shopper, you may have tried eBay and our auctions we are known for.  Today we want to let you know that unlike auctions that took tons of time and that stinky search engine we used to have and lack of selection, this is the new eBay! We have fixed-price, a great search and more selection!  Try us again. 

They face such an uphill battle brand-wise, I don't think eBay can come out with a soft: "Hey we still have the auctions you love, and we've added great fp items and more selection and we've made it really easy to find stuff."  It's not dramatic enough to convince shoppers that there's anything really special/different going on.

It's not all gloom and doom as eBay has a couple of things going their way:

1. Fixed price is growing so some buyers out there must realize that eBay has it available.
2. eBay's strategy with large retailers is interesting and if successful could be a sword in Amazon's only weak spot (as a large retailer, they have hard time partnering with other large retailers whom they essentially compete with).

Can someone pass the zero-calarie double stuff oreos please?

SeekingAlpha disclosure: I am long eBay and Google.

Comments

[J. Ignacio]

EBAY IS BECOMING A RIP-OFF:

How is it fair that all sellers pay the same amount of money for a listing but only a few selected ones ever make it to the first page. This is what is happening in ebay through an obscure algorithm that determines whether or not your listing for which sellers pay a fixed price will be prompted in the first pages of hundreds of listings inside ever wider categories. At the beginning ebay was able to calm the power-sellers by telling them that the better rated sellers would appear on the first spots. They organized the areas to be rated and had all the sellers compete for recognition in this areas. As times go by sellers realize that it was not as simple as that. Many sellers with low rating(DSR) appear at much better places than prime seller who's rating is above ebay's average. As it turns out ebay's obscure algorithm does not want many items from the same seller to appear in the main pages, as it discovered that their algorithm resulted in only a few sellers getting most of the visibility and therefore, the sales. Regardless of what kind of algorithm they use, the question remains: Is it fair to charge all sellers up-front fees for an unknown visibility outcome?

Without being able to offering clear visibility status or perhaps exposure time for their listing price; ebay has become more like a gambling place than a fair market. If we compare this with other media such as TV ads, newspaper spaces or even internet Pay-per-click ads; we can clearly see how unjust ebay's obscure visibility How is it fair that all sellers pay the same amount of money for a listing but only a few selected ones ever make it to the first page. This is what is happening in ebay through an obscure algorithm that determines whether or not your listing for which sellers pay a fixed price will be prompted in the first pages of hundreds of listings inside ever wider categories. At the beginning ebay was able to calm the power-sellers by telling them that the better rated sellers would appear on the first spots. They organized the areas to be rated and had all the sellers compete for recognition in this areas. As times go by sellers realize that it was not as simple as that. Many sellers with low rating(DSR) appear at much better places than prime seller who's rating is above ebay's average. As it turns out ebay's obscure algorithm does not want many items from the same seller to appear in the main pages, as it discovered that their algorithm resulted in only a few sellers getting most of the visibility and therefore, the sales. Regardless of what kind of algorithm they use, the question remains: Is it fair to charge all sellers up-front fees for an unknown visibility outcome?

Without being able to offering clear visibility status or perhaps exposure time for their listing price; ebay has become more like a gambling place than a fair market. If we compare this with other media such as TV ads, newspaper spaces or even internet Pay-per-click ads; we can clearly see how unjust ebay's obscure visibility algorithm really is. It seems not even their engineers can tell what the outcome will be, thereby they have a flat fee for all listings and feature sellers at almost random hours and times. In TV, they would definitely charge more for ads at peak hours and only a small fraction of that for commercial in the middle of the night. In news papers they would charge more for the first page and the size of the listing. All clearly explained before charging customers. In the internet world the offer and demand determines the price of different words where everything is clearly explained before customers pay for their time, space or word. Ebay was a fair market when everything was a straight forward cue of ads. The peak hours had more ads thereby, had more pages of ads in less time which automatically decreased visibility.

Given all these facts, I am really surprised that no one has sued ebay for their unfair practices, closing their one's open market with fair trade practices. To make matters worst, because they haven't communicated sellers of all the ongoing changes, their practices are completely illegal and anti-constitutional.

[Rob]

I like this board because it's not about ebay sellers that are complaining about their monthly fees of $10 going to $11. My fees last year were over $464,000. I'd gladly pay more if there was a good ROI. Now my fees are about $17k a month and declining.

Since it's more expensive to sell on eBay and profits are lower, I've simply put my own store items slightly below by eBay items (Great post Scot about the actual percent of fixed price listings) and tell all my customers about my new store with the lowest prices. How do my customers know about my new store? I have over 52 ways I tell each individual customer. Email me at robert@traderlou.com if you want the list.

Note about the new CA premium store if I can give some constructive critism here...nice idea but I don't want to pay more money for a nicer look on the same slow moving web server. Yahoo Merchant web servers are extremely fast and it costs less than $100 a month and can be set-up over night. Maybe the new CA premo store has a fast web server but I don't see a mention of that and it's about my #1 concern.

Best wishes to everyone.

[Steve.M]

Scot...re this:

"Consumers don't want auctions"

Really? that is what created the ebay multi billion empire in the first place. Do you really think that in the space of a few years these MILLIONS of ebayers simply no longer want auctions? I believe you are fundamentally wrong on this point.

They wanted auctions (and ebay) for three main reasons...1. The overwhelming majority of people want to think they have some chance of landing a bargain. 2. They like the competition aspect and the 'thrill' of winning. 3. They wanted to see the 1000's of scarce and unusual items.

They get neither no.1 nor no.2 with BIN's...and the huge and ever growing loss of the small/meduim private sellers is rapidly killing no.3.

I think both you & ebay are entirely wrong thinking the buyers no longer want auctions.....and this is one of the huge reasons ebay is dying..

cheers Steve.M. (UK)

[DAVID RIDDLE]

AS AN EBAY SELLER, I AM NOW INCLUDING THE FOLLOWING LETTER IN EVERY EMAIL AND SHIPMENT TO MY CUSTOMERS. FEEL FREE TO EDIT IT FOR YOUR OWN PURPOSES. DAVID RIDDLE

IMPORTANT: PLEASE READ THIS LETTER, IT EFFECTS YOU!

Dear valued customer,

Would you please take the time to read the following before leaving us feedback or assigning us “stars” on the DSR (Detailed Seller Rating). Please call our toll-free help line (800–544-3746, or 818-994-2449, 9AM-6PM, M-F, PST) if you have any questions or need assistance of any kind, WE ARE HERE TO HELP YOU!

On aug. 20th 2008, eBay moved the goal posts and changed the seller requirements (again) concerning feedback; now making it near impossible for honest professional sellers like us to remain on the site if you don’t help us in this situation. eBay clearly has not informed buyers how your feedback can destroy sellers.

Did you know that when you click on four out of five DSR stars when leaving feedback (a B+ grade in the real world); this Is a failing grade for every seller on eBay? The new rules require a minimum of “4.3 stars” in each of the four categories of the DSR. If you don’t voluntarily leave sellers five out of five stars in all four DSR categories, good sellers like us will be removed from the site!

THIS IS NOT A JOKE, eBay recently removed us from the site for three weeks due to “Seller Non-performance” because of one negative, one neutral and a single 4.2 DSR category “shipping time” (Note: many of our products are rebuilt to order and we always alert our customers of longer delivery times). eBay’s program automatically determined our fate using a single 30-day sample period! We are not alone; without warning eBay has done this to thousands of other absolutely good sellers (for proof: Google “angry ebay sellers”)

eBay’s ridiculous new statistics program threw out 9-1/2 years of unrivaled commitment to customer satisfaction and determines the survival of our business with a “30-day rolling sample window”.

With more than 10,800+ total positive customer ratings, we always offer the eBay community; unique, useful and fully guaranteed technical products. In addition, we have also provided everyone free personal expert technical assistance through our toll free (800-544-3746) help line, with or without a purchase.

Could eBay possibly believe that these changes will help you the buyer have a better eBay experience? The answer is obvious, if eBay management persists in this direction, the only experience eBay buyers will have in the future is the loss of dedicated, hardworking, and ethical sellers like myself and many thousands of others.

The magic of eBay has always been the sites’ diverse marketplace, “where cottage industry became global”. When all the sellers of unique new and used goods disappear; eBay will become just another web site hawking automated electronic shopping carts filled with imported consumer goods! With your help and my commitment maybe we can bring the magic back to eBay.

Please call me if you have any questions. Thank you for your patronage and support, David Riddle

P.S. if you would like to receive a copy of the comprehensive article: ”There are lies, damn lies and then there are [eBay] statistics” that I wrote about this travesty of eBay’s managements’ “new ideas”, please call me! (This article was viewed by eBay’s “trust and safety” department and in 14-hours I was reinstated on the site, with restrictions of course!).

[it's over]

The bottom line- eBay will never be a company that I trust ever again.

Doesn't matter what they do.

As a result of my selling experience (lack of support, inserting themselves in every aspect of my business while continuing to hide behind the 'just a venue' curtain), my buying experience has ceased too.

I am not the only seller who feels this way. Not by a long shot. So, unless eBay decides to start purchasing and selling their own merchandise, they no longer can count on an endless buyer stream.

They are killing the goose with the golden eggs and while it will take a while,even you Scot, will eventually be touched by the tentacles of this self destructing octopus too.

[Rob]

eBay will survive only if it's sellers survive. Sellers are not surviving...we're taking every customer we can and shifting the buying interest to other sales channels.

Interesting that nobody has what eBay has...the largest population of sellers...and eBay treats them terribly.

Anyone can create a fixed price market place...that's no big deal. It's not an auction vs fixed price decision. I've never even seen a scientific survey about this debate.

eBay will continue to decline because they have not fixed the hole in their ship. I refer to my partnership with eBay as a daily rental agreement. Anytime eBay can simply close my account...for any reason. I see this every day. The "hole in the ship" is sellers moving their business elsewhere.

How can eBay grow and thrive? It's not by going head-to-head with your biggest competitor like Amazon. When in history has that ever worked?

Create long-term seller partnerships with ALL sellers that meet standards...please don't change the standars mid-way through the game. Guarantee my account, that eBay will not wipe me off the map. Treat my account like a piece of realestate where big volume and longevity makes my account more valuable.

eBay sellers that have failed have done so because they did not moved their customers to independent market places. There are 26 things I do with my customers for each eBay purchase to move them to other market places.

One is writing comments on popular blogs :) Visit http://www.TraderLou.com

[Jim]

With all of the copying of Amazon that eBay is doing right now with the adding the Stars ratings, shipping fee limit on media, no Money Orders / Checks accepted, suggesting Free Shipping, Media condition rates going from new/used to same as Amazon multi condition ratings etc.

If I did not know better... I would think the stars are aligning for a merger between the two companies.

[Jose Flores]

Why ebay is not amazon? (but EE could have been).
If someone finds madona's under-ware, you can bet it will be posted in ebay within a few days, not amazon. See, ebay is for selling solutions, not UPC branded products. It was an open auction site... lol

[Jose Flores]

Hello Scot,

This will be long: (I copy what I posted in another blog)

After so much confusion, I have decided to write it all. Here it is:

From a Platinum-Powerseller: This was the worst year of ebay for a reason. They totally missed the point of ebay. eBay is openness, and like I always said: ebay is the only channel where we could sell solutions, not only products like amazon. I decided to sell accessories exactly for that reason, ebay allowed me to put together solutions for different industries (photography in this case). I was able to offer kits for realtors, kits for dentists, all by combining various products out there. Other example: If I didn't understand about surveillance, I would visit ebay and could buy a solution that included a cheap DVR and webcams put together software and all by a random guy that obviously played with it and without the need of a UPC could sell to us the whole solution. Inside ebay we are able to talk to that guy... If you want security system for your house and installing it yourself, you could count on ebay. I could keep giving examples...

They are destroying this experience, by focusing on the aligning all sellers to conform with their new rules. Making us upset by lowering visibility (search standing) if we get less than 4.7 stars out of 5 (makes me laugh because I don't want to cry). Instead of attracting sellers full of ideas, they are scaring us of -- leaving the few old big guys. Okay, they could have done that a few years ago when ebay was the only game in town, but now we can do our own website in less than a week. Promoting it is not as expensive as ebay and we actually keep what we build without the need of company's like channel advisor. To summarize these are the three ebay mistakes: discourage and upset sellers (ebay's main asset), try forcefully organize search standing (all that work for the same results -- you will see), lack of understanding of their own business and the philosophy that created their own success (openness & equality -- giving the same search standing to a guy in Namibia trying to sell a hand made sweater than the ceo of Ralph & Lauren -- this is gone!!).

When ebay brainless dictators started all the changes, I kept telling myself, they will never be able to compete with amazon at these prices (yes they kept increasing them instead of leveling them), but that's okay, they could afford it, because like I said, ebay allowed the average Joe to sell solutions fast and easy!! Put them side by side with the biggest brand names. I laugh so many times, with ebay ads, one time I found this guy who imported iPod like Mp4 players (brandless -no UPC), and did his comparison chart comparing it to the beset iPod; Side by side, it was a better proposition for half the price. He sold it all! Can you imagine a little Taiwanese street vendor perhaps being able to compete with a giant like apple -- yes they are not the David anymore (they still try to pretend they are:)... I also kept telling myself, their ideas are not bad, but why mess up something like ebay trying to implement them (After I dismantled my sister's bike trying to make a bubble making machine when I was 9, i was taught by my father to never destroy something in order to make something else -- logical isn't it), that is why I applauded the previous management team when they came up with ebay express (they were listening and were willing to experiment) -- the only mistake they made was the fees (yes! ebay express was about fast shopping cart, not communication with experts selling Solutions). The outcome would be completely different if they offered free listings, low closing fees following "grow fast" marketing used by amazon when they started. Instead, ebay express was the ebay Buy it now, that everyone knew were more expensive than the auction starting price in ebay (in fact: Sellers highest possible price). Where was the common sense of the guys creating it? -- just give it gas, I guarantee sellers were ready.

So you might think, sellers are happy because they finally got it, they have lower prices and introduced FP30. No my friends, this is another huge mistake my friends... We sellers price products according to the channel's fees, so now turns out that my Buy-it-Now prices are lower than my auction starting prices. Good for me, but this is a huge strategically mistake for ebay. They are competing with themselves:AUTO-DESTRUCTION!!. Instead of doing it on another site, like ebay express, they decided to close it and put all eggs in the already fragile egg's nest (they decided to do dismantel the bike, and I doubt their father is a mechanical engineer that will put it back together even when I had lost half the screws). So what's going to happen with channels? First let me clarify, that ebay FP30 low starting price and same closing price as amazon is still far from achieving fees a yahoo store (1.5%) or amazon (8%) is able to offer. Please remember that amazon charges 8%, but that includes credit card processing (almost 3%) and customer service ($$$). Can you imagine? So as you can clearly see, they have given these monkeys a machete and invited them to our elevator. I loved ebay, I made a dissent living for the past 5 years and hurts watching them destroy it. Coming back to what's going to happen with channels, the business will become more competitive. Paying 2% for channel advisor, will be a huge deal, not a drop in the bucket, yes we sellers compete with other sellers and their tool selection.

In conclusion, closing ebay-express and introducing lower fees for fixed price, will hurt the whole multi-channel industry (service providers, not sellers). Their only hope for getting something out of their changes is gone with ebay express. They will be forced to lower prices for auctions because all sellers will do Buy it now on low price items. The confusion created for sellers and buyers has opened amazon doors wide open, where a french guy will receive you with open arms (you know who I am talking about... He is awesome!).

I kept quiet all this time, but this month was worst than ever, so there you have it. Please, please someone forward it to the ebay management team. Tell them to treat my deserving insults as frank constructive criticism.

Good bye cruel ebay!

your friend and neighbor, (RTP, NC)

Jose Ignacio
919 321 1239

[dimes]

People prefer the "stinky search" a lot more than they like whatever mess you want to call the system that replaced it. eBay used to have a great search engine. They killed it dead.

And no offense, but you've been saying for awhile that eBay can fix finding and fraud. We've seen no evidence that they've been able to do either.

[Brian]

Scot, your points are intellectually honest. But human nature is far greedier than you may want to acknowledge. Brands do have value and they mean a lot, but the almighty dollar has a greater value than a brand.

Remember ValuJet? The company who's plane crashed in the Everglades? Talk about a brand problem! Nobody would fly ValuJet after that crash.

ValuJet knew it and immediately bought a very small airline and "re-named" themselves AirTran. Note: They did not change their operations -- just the name. AirTran, like its predecessor ValuJet, operated with the same planes, gates, pilots, flight-attendants and mechanics -- and its brand promise remained the same as their ValuJet promis: offering low super-discounted fares. True, the name changed, but the "brand" did not - and people flocked-back to fly again because they wanted those lower-fares, the brand be damned!

Brands aren't nearly as powerful as prices -- especially with commodity goods.

This means buyers will come back to eBay when prices on eBay drop far enough.

As we've seen time and again, prices on eBay will definitely drop when/if supply increases.

Supply on the site will likely increase when eBay opens the 30-day FP listing format on Sept. 16. Note the new format did not replace any existing format -- it was a net add of formats. Sellers will not likely replace their current strategies, given the modest listing fee they will ADD new listings.

This listing supply increase on the site coincides with the start of the Christmas selling season.

Since most sellers bulk-up on inventory for Christmas, the over-supply of items and listings on eBay after Sept. 16 will lead some sellers to panic as they realize they are sitting on a lot of inventory which isn't moving as they had hoped.

Around Oct. 15, When this realization hits with full-force, sellers will drop their prices using the FP format (can't do it with auctions and stores won't get exposure even if they are lower priced). The first low-price leaders will gain the top spot on the FP results and think they can unload all their inventory before anyone else catches-on.

However, competitive sellers will immediately see a drop in sales and they will respond by lowering their own prices or risk being saddled with "their" own Xmas inventory. A decreasing pricing cycle will ensue after that.

As these prices drop, buyers will bite on the new fixed price listings. Their current view of eBay as an auction site, flea-market, fun place, etc. notwithstanding. Brand or no brand -- when the prices go low enough buyers will buy.

Ruth Blumkin's husband (the founder of the Nebraska Furniture Mart, now owned by Warren Buffet) used to say that you could but a store on an island in the middle of a river, and if your prices were low enough, buyers would still find a way to get to you.

Same is true for eBay.

Brian

[Arie - IM Online ltd.]

Last issue i wanted to note about,

eBay.com and eBay.co.uk have recommended to adop the fp30 strategy before the fees change date Sep 16 (for reference see, FAQ's: http://pages.ebay.co.uk/buyitnow08/searchplacement.html)
this is because it claims it will give a head start to those sellers that will do so (that will improve their appearance on searches).

so if the policy applied early, that means that most if seller is going to list 1000 items at $100 each prior to the pricing change, he is going to pay:
$2.00 * 1000 = $2000 (before Sep 19)
VS.
$0.35 * 100 = $350 (after Sep 19).

question is, whether this "the sonner the better" recommendation by ebay is worth the $$$ prior investment.

personally, in figures of ROI, i don't think this would be the right choice.
and waiting till Sep 19, to list will be good enough (i have hunch that not all sellers will implement the new changes immediately.. some take their time with doing their homework).

Arie

[Arie Shpanya]

Scot,

from what i read here it seems that eBay is on crucial point which it has to decide whether they throw auctions under the bus, or keep it as one of it's know brands.

It seems to me, that eBay is going to favor the Fixed Price format, and gradually fade out the auction style format.

Question IS:
you said:
"if CR > 50% - seller should list as Auction style"

but with eBay favoring the FP30 new format [placing of Ad in the search will be revised by last sales activity in this listings- which obviously leads to place where seller will wnat ot list FP30 Multiple quantity fixed price (MQFP)]

so if some item sells over 50% CR in FP30 it will show better results on search (raised in search based on 7 last days sales)...
so eventually decision between FP30 to Auction style, is not so ovious (not to forget that auction insertion fees are usually 500%-800% then the FP30 insertion fees.. with a high volume that can be substantial ).

for the sake of this example, if show seller sell 100 items from same sku in Auction style per month, with 50% CR (closing rate), $100 for each pair- that means that with Auction style you will pay:

200* $2.00 (for IF)
100 * 6.15 (for FVF)

TOTAL OF: $1012

BTW.. ebay has errors in it's own fees calculation example pages: http://pages.ebay.com/sell/August2008Update/Examples/
(since the first Final Value Fee tranche has changed from $0.01 - $25.00 to $0.01- $50.00 ).

for FP 30 it would be:

$0.35 (for IF, single payment only)
100* $10.50 (FVF)

TOTAL: $1050.35

slight advantage to the *Auction Style* upon *FP30* indeed (if you sell above 50% CR for this sku the number get better),

but still.. with the FP30 search enhancement results (sellers who list FP30 with high CR for the item + high DSR will be placed higher), so that leads to the concluding that it is indeed not so obvious that Auction style is better them FP30 even if you sell above 50%CR.

IF YOU LIST FP30:
HIGH DSR + HIGH CR% --> HIGHER PLACEMENT IN EBAY SEARCH RESULTS --> leads to increasing of your CR% to even higher %.

so in other words, even if the CR if above 50%- sometimes the FP30 can leads to increasing the CR% (in the cost of higher fees).
so theoretically .. if we try to put it in numbers. it can be compared to
selling 100 items in 60%CR with auction style Vs. selling 120 same items via FP30 format(which can be compared to something like 80% CR).

those 20% improvement in CR/Selling rate (just allegedly number.. as we do not know how higher the results would be for the FP30 vs. Auction style in ebay new search algorithm).

so that means this seller will sell additional 10 pairs with for $100 each.that is additional $1000 to the GMV.

if seller cost per item is $50 (yes i know.. too many hypothetical elements in to this equation.. each one of you will need to apply it with it's own numbers).

stick with me just a bit..
**Auction Style - 60% CR:**
list 167 Auction listings (that is 100 sold items in 60% CR).
GMV = 10,000 (100 items * $100 sold each)
Total Cost = 5,000 (cost per item is $50).
eBay Fees= $949
Effective take rate: 9.49%
Net Profit: $4051

**FP30 - 20% increase in sold items (120 instead of 100):**
better search placement leads to 20% increase in number item, you can compare it to Higher CR)

GMV = 12,000 (120 items * $100 sold each)
Total Cost = 6,000 (cost per item is $50).
eBay Fees= $1260
Effective take rate: 10.50% (stayed fixed with this format)
Net Profit: $4740

that means 17% INCREASE IN NET PROFIT.

so bottom line.. you need to take enhanced search resualts of the FP30 into account.

Would be happy to get your comment fox,
i'm also available at aries@imonlinegroup.com

Arie.

[unless your start price is lower then $9.99 where insertion fees are same as fp30 )

[John]

Hey Scot, this article is SPOT ON! and your deep thoughts are very much in line with your expressed thoughts. Especially the last Catalyst this year! My notes from your talk has 3 key points about eBay that we (3rdPO.com) took very seriously...

1) CMV growth was DOWN
2) Active users were DOWN and not growing
3) Fixed price was UP 40% (HELLO)

Then Stefani (ebay exec) told EVERYONE that you will not recognize the eBay of tomorrow. That alone was the precursor to what we are seeing being done today. Unfortunately, it could be too little too late for Q4 to brighten up. Well, we will see? But my guess is January 2009 is going to suck bad for John and Lorrie, and I think they are nice people :-)

john

[Stefan]

Scot,

This is a fantastic post. A few thoughts:

You mentioned: "...new excited buyers won't be coming back until eBay can convince them that this is a different eBay. With 10 years of auction, auction, auction baked into this puppy, that is going to have to be one heck of a campaign and it ain't "Shop Victoriously"

...They better get on this, quick. Word on the street is they have zero advertising planned for Q4. This could be either because a) They aren't ready to show the world the new eBay yet, or aren't sure what exactly this new eBay entails, or b) They don't want to spend the money.

Keep up the good work.

And I love the nod to Jack Handey :)

[nadine]

scott, you said

Auctions can't be revived. They will always be there and useful, but they are saturated at this point and not growing.
Many sellers blame fixed price for killing auctions, this is wrong, it's buyers that don't want to buy this way.

I both agree and disagree with these statements. The fad for auctions, for buying everything including new sneakers in an online auction, that fad is over.

But there is no reason that online auctions should not flourish for those items they work for in real live: used goods, wholesale lots, one-of-a-kind antiques and collectibles. Especially in a sluggish economy, the main site for buying and selling used goods at bargain prices should be BOOMING.

It's not booming because eBay has been treating auctions like a red-headed-stepchild for years, trying to shove auctions into a corner while they fix and refix and refix the site to be just perfect for fixed-price. That can't be done. The psychology is different. Nobody runs an auction house inside a Walmarts. They strangled auctions by removing everything that used to make the auctions fun for the sake of selling fixed-price goods.

Let them spin auctions off onto an Ebay Classic site, lower the damn fees (for real, not just blowing smoke to The Street), and get out of the way. Then you will see auctions bloom and flourish.

[Patricia013]

I no longer know what Ebay thinks, nor do I think they have a definite plan. Its kind of obvious to me that they are playing this out as they go along and that the new fee "decreases" are a desperate move to get more sellers on board (who are also buyers!) They lost these seller/buyers in droves all summer long and their sell thru rate showed it clearly. I disregard anything wall street gurus say. They have NO experience in this very complex Ebay online business. I have 10 solid years in it so I'm pretty sure I can almost figure them out and what I see is a totally misguided and inexperienced ebay team. I'm hoping things will turn around before they reach the edge of that cliff...but I can clearly see it coming. Now, with the new fees everybody and anybody will be glutting the site with tons and tons of junk. The very stuff Meg Whitman complained about not so long ago. Mixing 7 day auctions in with 30 day fixed price listings is going to be one big ball of string and nobody will be able to unravel it. Me? I'm headed to Etsy.com, blujay.com, onlineauctions.com, iOffer.com and numerous other sites besides my own. I need less stress in my life so now I will just sit back and watch Ebay and hope they can find their way out of the horrendous mess Donahoe has made of the site since January of this year! In the end I'm hoping something will live of the Ebay we all knew and loved.

My advice to Donahoe - Hey guy...nobody likes a copycat!

[Chris]

I am not sure why the analysts don't love this change. For anyone that actually sells product on ebay this is a substantial increase in fees. Depending on my item my hit will range from 10% to 34%. So I already got hit once this year and now a second time.

These changes are not going to help me sell more. Ebay is not going to do anything more to drive more traffic to the site. Since they had their pissing match with google last year before Live the amount they have spent on targeted advertising has gone down dramatically along with the corresponding traffic and therefore sales.

Also any brick and mortar property owner that tried to get double digit rent increases in a single year would have a lot of empty property. Perception is not going to kill ebay, lack of items is going to kill it. Ebay knows it needs more items listed but cant bring itself to actually do something to take care of its customers, the sellers. We sellers are not stupid, and this is a fee increase nothing more. All it helps are the listers not the sellers.

[Anne]

Scot, I understand all the points in your post completely. But....

It's easy for all us widget sellers to forget that there are still many, many, MANY people in the world who:

a) Have unique things to sell that NOT everyone else has to sell. Everything from an out of print vinyl Jazz record that will gross $700.00 to a vintage toy train set from the 1950 that will gross $7000.00. Or a vintage Star Wars movie script signed by Mark Hamill in 1977.....I could go on but you see my point...

b) eBay is still the only truly easy to use and financially viable option for these countless sellers and it is usually STILL the auction format that these sellers use to sell their goods....

No matter what happens to eBay, I think they can't escape their original identity, at least in the part that eBay is known as THE place to buy and sell unique things....not necessarily mega-valuable things, but unique things....

That said, I have one point to make about eBay, the online DISCOUNT MARKETPLACE....I'm with everybody else; all these changes aren't going to work, as far as the fixed price marketplace for commodities and widgets. It's like
trying to turn the the Dollar General Store or K-Mart into Tiffanies or Sothebys.....heck, you can't even make the Dollar General store into Target!!

Aint gonna happen!