eBay Strategies

eBay to release new weapon in the 'selection' battle - InDemand

**Update - several commenters have correctly pointed out that I neglected to mention that the criteria for a seller to use InDemand is that you have to be a PowerSeller with 30-day DSRs over 4.8.  I agree this is a very high bar, and I'm already on the record with my top 5 reasons DSRs are broken here so don't shoot he messenger here. If you want access, might as well send an email to 'indemand@ebay.com'.

ChannelAdvisor and some of our eBay selling customers have been giving eBay some beta feedback on a new program they are calling InDemand.  eBay was kind enought to let us blog about this before it hits the radar (with the stipulation that we didn't have to pull any puches of course).

Introducing InDemand

The general idea is as follows:

• eBay is (finally!) starting to get some religion around the importance of selection. The prior regime implemented many policies that in my opinion hobbled selection at eBay - frequently I tell folks that eBay "cut off its long tail".  On the flipside of that coin, Amazon around the same time (mid-06), realized that mid-size retailers can bring some really interesting selection to the site that is filling out the long-tail for Amazon.  They priced their third party offering with this in mind (high bar, but once you are in, no listing fees).
• There are two major hurdles to selection on eBay: 
  •  Information - eBay has tons of data on who is searching for what, what listings are being watched, what millions of keywords they are buying from google, etc.  However sellers never have access to that data.  When your supply is blind to demand - it seems obvious that there will be unmet demand due to a fundamental lack of information parity.
  • Channel Pricing -  Frequently eBay's listing fee, final value fee or both can make it uneconomical for supply to come to the site.  For example, everyone in the media categories knows that the ebay fees make it a non-starter for brand-new items to be on the site, thus eBay tends to not have big slices of 'recent releases's on the site.  (mini rant - In my opinion,listing/insertion fees are the archenemy of selection.  eBay argues they are quality's friend, but personally I worry more about selection and quality will take care of it self if you have a good search/finding experience.)
• Enter InDemand - InDemand is a microsite at indemand.ebay.com that looks to address the two selection challenges (Info/Pricing).  It does this by first providing a list of 'in demand' products based on eBay's research (this addresses the Info problem). Secondarily, InDemand gives eBay the ability to offer spot fee discounts (listng+FVF based on my understanding) for the products it feels are important for selection but due to the very broad fee structure, that product is not coming to the site.   

Did you say lower fees for InDemand items?!?!

I think this 'item level fee discount' capability and big strategic change on eBay's part in thinking about eBay fees (we went from global to geo to category and now to item) is the equivalent to a tectonic shift and worthy of a moment of reflection....

Ok, now let's dig into InDemand more.

How InDemand works

A seller logs into indemand and is presented with the entire list of indemand items.  In this screen shot below you will see there are currently 510 items.

 

If you look at the first item here - a book, you'll see a couple of things of note:

• First, you'll see every InDemand item has a 'eBay Product ID' associated with it.  This looks like eBay starting to head to a more Amazon-like ASIN model.  I guess now we have EPIDs and ASINs (that one is for the readers that always comment about my copious use of TLAs).
• Next, if you look at the little box at the left, that's where you'll see any promotion (listing/fvf fees) associated with that item.  At the time of this writing none of the items have promos, but eBay swears they are coming. 
• Next, there's a 'currently' on eBay link that pops a new window with all of the listings on eBay right now for this product. 
• Finally, you'll see there's a 'sell this item' link. This link will take you to SYI which is pre-populated with that products information.

Use case

Let's go through a use case. Let's say I'm a Lego seller and I'm going to order some product tomorrow.  I go to indemand and search for Lego: (full disclosure - Lego is a ChannelAdvisor customer and I'm a Lego customer).

As you can see there are three lego items InDemand, two video games and one toy.  If you click on the toy item, the details are displayed:

So now I know exactly what SKU we are talking about.  Next, I click the 'currently on eBay' and am tickled that there are none on the site.  At this point, I may check pricing on other sites to get a feel for what the item is going for and where I need to be competitive on pricing.

(Interestingly enough, when I do a text search on eBay for "Lego Star wars jedi starfighter hyperdrive" I get 14 core results and 15 store that look like the exact product.  This points out the tough transition eBay faces form text-based wild-west to catalog-based organization.)

Anyway, pretend there aren't already 30 of these on eBay, I go to my supplier, source this item and now am the first to sell it here (at least in the catalog) and enjoy the benefits of any reduced fees as well as what should be some fast selling product since eBay is telling me there's lots of demand and a lack of supply.

eBay tells me InDemand has triggers that will monitor the supply and pull the item once the desired number (not published) are listed.

How do the fee discounts work?

I suspect the top of mind question for most readers now is how does the fee piece work.  Here's a brief excerpt from the InDemand FAQ:

"When do I receive the discount?
If an Insertion Fee discount is offered, you'll receive the discount at the time of the listing. If a Final Value Fee discount is offered, it will applied at the time of the sale.

How long does a discount last?
A discount is valid if units are still needed and the promotional period has not ended.

How do I find out the quantity needed for a certain product?
The first line of the listing requirements indicates the quantity of a product that eBay is looking for.

Do I still receive my PowerSeller discount?
Yes. Any In Demand discount will be in addition to your PowerSeller discount."

I also asked eBay:

Q: Do sellers have to list the item via InDemand to receive the discount?

A: No - as long as you list using the catalog/item specifics during the promo period (live on InDemand), anyone will receive the discount regardless of if it originates via InDemand.

So think of InDemand as a guide to items that are 'on sale' from a seller's perspective on eBay and you are free to list those items however you want.

How does eBay determine what's 'in demand'?

The next series of questions I had were around the demand calculations.  eBay was pretty closed lipped on this, but I get the feeling they look at several sets of data including:

• Catalog coverage - one of the nice things of having a catalog is you can run queries such as "how many catalog items have zero listings".  That's an easy one.
• Search data - ebay has a wealth of on-site and off-site search data and subsequently knows how many results are returned.  Another interesting query would be: 'show me the top search terms internal+external that have null search results.
• Closed loop data -  John Donahoe (JD)  has been saying for years that ebay has the most ecommerce data on the planet and I agree this is an asset that has gone somewhat unused at eBay.  This data is a great gauge of supply and demand. Historically eBay has licensed it out at very expense rates to tool providers with somewhat mixed results.  At ChannelAdvisor we have elected to not license this data because of the lack of structure and usefulness at the end of the day. With InDemand, you could really finally see eBay using this data to figure out which products have unusually high conversion rates and then make sure the marketplace continues to fuel that demand such that it doesn't go off-site.  

One item to watch is how automated the indemand listings are.  I get the sense that there's some manual steps to the 'demand calculation' process so we may not see ebay update the list as frequently as you may like going into the holidays.  That being said, I'm sure if this product is successful (easily measured BTW), then I could see eBay making whatever the next step of investment is to automated the calc+gen of the indemand listings.

Yes it works with third party software! (but we want APIs!)

While InDemand has a handy link to the SYI form for those sellers that use SYI, eBay assures us that a listing of an InDemand item via ChannelAdvisor and other third-party software will receive the discounts.

Long-term what we would love is APIs into the indemand items. Here's why. Our customers typically have their entire inventory in our software (hosted or via a datafeed) and then they send subsets of that inventory to different channels. Imagine if we were able to ping the Indemand database and highlight in the CA complete inventory screens the items that are 'InDemand'.  This would cut out several steps for the sellers of going back and forth which in today's time-limited world can be a big friction point for new systems like this that do things onesy-twosy.

What does this mean for the eBay/Amazon battlefield?

As far as I know, Amazon doesn't have an equivalent to InDemand, but they do provide a very rich set of APIs that provide lots of transparency on demand.  For example, as a developer you can call APIs that tell you which items in the catalog have zero listings, which ones have 'wish list' items set, etc.

Thus it seems Amazon is taking more of a platform approach here - provide the APIs and third parties will innovate whereas eBay is taking more of a 'if we build it, they will come' kind of approach. 

Also with Amazon as I mentioned because of the fee structure, sellers spend zero time worrying about which products to list there, because they just list them all.  So something like InDemand would only be interesting to Amazon sellers that are looking to source more specifically for that channel, vs. identifying items they already carry that maybe a good match for the marketplace.

On eBay I suspect the InDemand usage will be both for items in-stock and for sourcing.

Conclusion

InDemand is an interesting step from eBay because it shows eBay is willing to head into some previously unknown ground:

• InDemand is the first eBay foray into SKU-level fee discounts
• InDemand is the first time eBay has focused on selection at such a granular level
• InDemand gives us a glimmer of hope that eBay is opening the kimono on some of the great 'demand data' they have kept behind iron curtains for 10+yrs.  I'm a strong believer that marketplaces thrive in transparency so hopefully this InDemand experiment will finally convince eBay that's the way to go.

For these reasons, I think its going to be a very interesting offering to keep an eye on and you can count on eBay Strategies to continue to keep you up to date on it.  You can see a path (small probability, but it's there), that InDemand can be like a lizard and help eBay regenerate it's chopped off long-tail, but we've got a good 12-18 months before we can see if that's happening or not.

Stay tuned and as always I'd love to hear your thoughts in the comments.

SeekingAlpha Disclosure - I am long Amazon and Google.

eBay's new 'no paper' policy FAQs

We're getting quite a few questions from eBay sellers of all sizes around eBay's new electronic-only payment policy (also known as paperless payments).  First, I urge everyone to read Dinesh's post here that has some good clarifications.

Additionally, I was able to catch up with John McDonald who runs eBay's Trust and Safety for the US today to answer the top questions we are getting.  Here are my questions and my paraphrasing of John's answers.

Q: When is 'no paper' going live?

A: It will actually be 'turned on' today (Monday, October 27, 2008) - What that means is:

• You won't be able to list with paper payment options (in the payment fields) via SYI today
• If you have any live listings with check or money order (MO) specified in your payment fields, they will no longer show in the 'view item' page of eBay 
• In your description/template, if you talk about check/money order, you will receive a message if you post via SYI, and you have a grace period until 1/15/09 to keep that text.  After 1/15, your listings will be in violation of policy and delisted 
  •  (Scot's advice - go ahead and take this out now and avoid any hassles) 

 Q: Some eBay Pinks/TSAMs have said that if a buyer specifically requests to pay with check/money order - the seller can take paper payment.  What's the official stance on this?

A: True. If a buyer explicitly opps out of electronic payments, the seller can take the check/money order.  However a seller may not solicit in any way.  Also for large sellers these kinds of payments can be a pain so they are free to reject the buyer's request for paper payment.

Q: Will eBay still provide tools in MyeBay that allow me to manually mark an item paid?

A: Yes, that will remain.

Q: There is some confusion around international (eBay calles this cross border trade or CBT)- e.g. can I specifically mention in my USA listing that "for DE buyers I take x, y, z?" - assuming x/y/z are allowed in DE, but not in USA?

A: John was going to get some clarification on this one and I'll report back.  Note this example can be between any two eBay countries where there are differencies in the payment policy which is actually pretty common.

Finally, thanks to John for taking the time to clarify these issues that are top of mind with sellers.

eBay's Q3 and what it means for sellers - I of II

Yesterday, I put together some first impressions of the results, and today I was able to scan most of the analyst reports and of course listened to the conference call. 

Today, I wanted to highlight some of the macro financial aspects of the call and then go through what eBay's Q3 results and Q4 outlook mean for sellers as that's what this blog is all about.

Summary of analyst thoughts

In general, the Q3 results were a non-event because they were largely known. Thus the big event was eBay's significant lowering of their Q4 outlook which caused analysts to also drastically cut their 09 views as well.  Most analysts I follow took down their 09 revenue significantly $800-$1b and gave EPS a big haircut.  The Q4 outlook represents flat Q/Q and essentially down y/y which has everyone freaked out.  eBay showed some scary looking charts that show a continued deceleration (ecommerce and eBay metrics) going into Q4 here: (click to zoom in)

First the upper right graph is the comscore ecommerce data (eBay doesn't say if it's ex-travel or not, I assume it is - conveniently there are no labels).  Comscore's August number was 6% - down from 10% in July.  I've marked that 6% - remember that number, it will come back up in the metrics of interest section.  Next, I drew a red line around early August in the eBay data that shows how things really started to decline for eBay.  Interestingly, at ChannelAdvisor we didn't see that slowdown, but did see it right around 9/15 when FP30 was released.  That bottom right chart has Wall St. freaked out right now because it is down and to the right, meaning the Q got worse so Q4 will start out at that very low data point.

Here's a brief summary of Analyst reactions:

• Brian Pitz@BofA - kept a buy on eBay and speculates that the eBay problems are macro and not eBay specific (he lowered Amzn, GSIC and goog revenues to reflect eBay trend)
• Justin Post@ML - speculates that eBay's problems are Amazon's gains: "

  also losing share Given magnitude of eBay's 3Q GMV miss ($14.3bn vs $14.9bn expected) and weaker 4Q guidance, results have a negative read-across for AMZN and GOOG.  However, eBay sellers as well as private and public eCommerce companies have indicated more deterioration on eBay than other channels and off-eBay PayPal volumes beat our estimate by $260mn.  We are incrementally more cautious on sector, but believe some of eBay's 3Q $640mn GMV miss likely moved to AMZN. 

• Scott Devitt@Stifel - heroically kept a buy on eBay, and focused in on the value of the future cash flows which make the stock appear cheap from that perspective.  He seems to recommend eBay acquire gmarket.
• Christa Quarles (who is no longer sober - ha!) tied with James Mitchell for the funniest title: "eBay: Lump of coal for the Holidays."  
• Imran@JPMorgan who has been bullish and is all about listings finally broke his bullishness: "eBay: Fall of a Franchise" and downgraded to Nuetral.  Imran believes margins are going to fall considerably and thus anemic operating income will result.  Imran focuses in on the various MP metrics and believes that eBay's user experience is not improved and if anything worsened.
• Meeker/Joseph@MS have an interesting 'sum of the parts' analysis summarized here: "Our sum-of-the-parts analysis values eBay at $26 per share. If we peg the valuation of PayPal at $7.13 per share, Skype at $2.09, Marketing Services at $4.08, and cash at $2.77, eBay share’s current price of $15 would imply the market is not assigning any value to eBay’s core marketplace"
• Ben@UBS points out that this is eBay's first negative growth GMV Q and like Justin@ML highlights increasing competition from AMZN.  He's also concerned with some of the slow-down at Paypal.
• Colin@Lazard focused on the macro economic 'rockiness' and took down not only eBay, but Amazon, GSIC and DRIV
• James Mitchell@GS tied Christa when noted that eBay sees: "No Christmas".  James believes that the companies problems are largely self-inflicted and while not helped by the macro, certainly the macro is increasingly exposing them.
• Jeetil@DB who was bearish, is vindicated by Q3 and lowered his PT to a paltry $13 from $16.  Jeetil feels eBay should sell Skype and use this opp to invest in the eBay core (I concur on this one - let's put 1000 devs on finding - NOW).
• Mark@Citi cites managements execution as one of the major problems at eBay and worries that the model is just fundamentally broken: "Execution -- fee/rule marketplace changes have been highly disruptive & arguably poorly implemented; & 3) Structural - Decreasingly desirable Auction format & an infrastructure-less business model arguably ill-equipped to match rising consumer requirements."
• Derek Brown@Cantor actually took this opportunity to leave grizzly territory for plain ole bear and has moved eBay to a hold from a 'sell'.   He notes this is the first time ever that eBay has had to essentially lower guidance and thinks it's a big step towards recovery.  Derek lowered 09 revs by a substantial 1.3b (biggest I saw).
• Marianne@SIG - Likes the stock here as a value play noting that it is at 9x revised EPS. She speculates that eBay could start a dividend (5%) so you should play the stock that way.
• Jim@cowen - Kept a neutral on the stock.
  

   

Jeetil had a really good graph I wanted to show everyone as it's relative to the seller impact of the Q:

 

This graph hones in what eBay has been calling a more important metric than GMV - transaction volumes.  What Jeetil notes is that Q3 started a material y/y deceleration that he believes will go negative in Q4 based on backing into the number from the lowered guidance.  Of course if transactions go down 7% y/y AND they are lower ASP, then GMV will get amplified down y/y substantially.

What's Macro and what's Execution/eBay?

The really big question coming out of the eBay call and subsequent analysts notes which we'll have some insight from the Goog+Amzn results is: "Is this slowdown specific or worse on eBay, or being felt everywhere in ecommerce/inet?".  I have some data to throw in the pot later on this point.

That's part I, part II coming later with an analysis for sellers and some Q4 action items.  I also owe some FP30 insights we've learned and I'll do that this weekend as well.

Seekingalpha - I am (painfully) long eBay and (thankfully) long Google.

eBay's search outage

**Updated to more correctly reflect the time of the outage. Details from eBay here.

Today eBay's search engine has been down for a couple of hours (see screen shot below).

The good news is that the paid-search advertising seems to be running just fine.  Maybe this is just a test to see how the site monetizes with 100% ads vs. all those annoying listings+gmv and what-not? 

What's also interesting is since the home page is very search driven it's causing all kinds of wacky behavior there too.

I'm getting increasingly concerned that all of the changes plus the influx of fp30 listings plus bugs upon bugs that are taking weeks to fix have so destabilized the search code that eBay can't get it stable for Q4.  Wait, we're in Q4..., ok, Thanksgiving++.

My advice to sellers - go buy some Yahoo! keywords in the US if you want some eBay exposure. While search is down they are getting all the traffic you paid listing fees for.

eBay's Q3 results first impressions...

When eBay pre-announced that they would come in at the low end of their Q3 revenue guidance and on the high end of EPS, most Wall St. folks started to think more about Q4/09.

Personally, I was impressed with this performance given some of the GMV slowness we saw on eBay and was wondering where the revenue+profits would come from to hit those numbers.  Today eBay announced Q3 results here and the answer is what I had guessed (hint - it isn't GMV).

In the marketplace business, revenue was up 4% y/y.  GMV was down 1% y/y and here's the catch - advertising was up a whopping 127% y/y.

I don't know what the FX-adjusted GMV was, but won't be surprised if it's ex-fx down 4-6% y/y globally and I'd bet 10% in the USA.

The bulk of this comes from the increased monetization of eBay pageviews with banner ads, skyscrapers, home page placements, and the increase of paid links on the site.

I want to do a lengthy post on this after the Q3 dust settles as I (and many sellers) scratch our heads on why eBay is taking such a short-term view of these ads and really sacrificing GMV (and placement that sellers have paid for) vs. removing the buyer-distracting ads and

The way we're going, I'm very concerned eBay will become an advertising site with some GMV on the side and that's definitely NOT the way to fix this marketplace.

Q4 looks very light
The street has Q4 at $2.3bn/.43 and eBay's press release has guidance of $2.02-2.17 and .39-.41.  The stock is getting hammered down to $15 and lower in AH trading, but we'll have to wait and see what analysts think and also if eBay gives any view into 2009.

More to come
I'll have some more thoughts after the conference call. Here's a tip - you can see the presentation already here.

SeekingAlpha Disclosure: I am long google and eBay

I've seen the future of Youtube and it is.... a marketplace?!

There was an under-the-radar post to a oogle blog that caught my attention because it mentioned Youtube and ecommerce in the same post. I read it a couple of times and then this really got me thinking:

"This is just the beginning of building a broad, viable e-commerce platform for users and partners on YouTube."

Ever since the 'will it blend' videos hit, the intersection of ecommerce+video has been an interesting idea, but most conventional wisdom was around enhancing your product descripitions with video.  

Youtube has an interesting opportunity to turn that idea on its head.  Make the videos the center of attention and then hang ecommerce off the videos vs. the other way around.

They have two interesting examples already. In this one, we can see a video of the video game spore and then right there (red box is mine) at the bottom is a link to buy spore from Amazon.

Next, here's a video for a song and right below the song are links to buy the mp3 from Amazon or iTunes.

Imagine the next logical step. You have some widgets to sell and Youtube provides a match-making service where you either upload a video with your products attached or you find a popular video and work with the producer on a X% rev share if they'll link to your offer for that product.

I've often thought that advertising isn't how facebook, myspace and youtube will ultimately make their $, they will instead need an ecommerce-based revenue model and it's interesting to see Youtube take this step. 

One piece of the puzzle that fell into place for me with this announcement - Ben Ling who started Google Checkout at Google left for facebook (where he started their ecommerce initiatives) and then recently went back to Google for an opportunity in Youtube (weird as he's an ecommerce guy not a video/ad guy).  It all makes sense now...  Good job bling!

SeekingAlpha disclosure: I am long eBay and Google

Are eBay invoice changes Yellow Button 2.0?!

Back in 2006, eBay implemented the infamous Yellow Button debacle that I hate with such passion, I can't discuss anymore and refer you here for details.  Now I'm hearing from sellers that eBay recently updated the way invoicing works and there is much concern this will become YB2.0.

Fortunately, ChannelAdvisor customers won't be impacted because our system automates invoice and post-transaction communication off-eBay.  However, for those sellers that use MyeBay to send invoices, here's the problem.

1. A buyer wins/bin's an item.
2. Frequently the seller needs to send an invoice manually to the buyer to specify shipping or do combined shipping and what not. 
3. The buyer receives the invoice 
4. Frequently buyers will have a question and reply to the invoice 
5. The seller updates the invoice or answers Q and sends final invoice
6. Transaction is consumated  when the buyer pays the final invoice.

That's how it used to work. Now eBay has evidently changed the system so that at step 3 above, instead of the email that goes to the buyer coming from the seller's email address, it has been replaced with: "ebay@ebay.com" as the reply-to address.

If your a buyer and are used to 'replying to these' (step 4 above), your email will go into the vapor.  The result?  Probably an increase in UPIs as the buyer will be cheesed off that you are ignoring their question with the invoice before they pay. 

Bottom line: Upset buyer, upset seller.

I used to joke in the early days of Yellowbutton that it would be really interesting to get someone in IT at eBay to open up the 'usetheyellowbutton' mailbox at eBay and see just how many people thought there was a human there vs. a bit bucket.

Now I'm really curious.  What if someone opened up this 'ebay@ebay.com' mailbox (I'm sure it just dumps to /dev/null). Here's what I bet you'd see:

"Hey, i'm really excited to get this item, but I'd like insurance, do you offer that?"
"I emailed 2 days ago about the item, I want to get it here quickly, but would like insurance."
"HELLO, DO YOU OFFER INSURANCE"
"Please cancel my order your customer service stinks."
"CANCEL ORDER"
"*C*A*N*C*E*L******"
(seller then files UPI, believing the buyer isn't paying, buyer promptly leaves seller neg, all 1's on DSR and orders the item somewhere else online because of frustration shopping on eBay.)

There are a bunch of other changes that eBay says are bugs they are fixing, but I'm particularly concerned about this email reply-to issue as I think eBay will add the seller info back to the invoice, but I worry the email is here to stay.

Flurry of eBay policy updates - shipping caps, return policies and more - oh my!

Earlier this week I reported on the confusion around media shipping caps.  I heard definitively from eBay that these go live on 10/9 (tomorrow) with some potential delay for things to roll to all the myriad eBay servers.  I'm hearing that TSAMs are still telling sellers a variety of different dates, but this is the official word from San Jose. (TSAMs are in SLC).  My guess is we'll know it's live when SYI effectively enforces them and the API does as well.  We'll check periodically on this through tomorrow and report when it has gone into effect. Note that it will be on the listing side, not live listings as I understand it, so one strategy might be to do a flurry of listings in fp30/stores with the old S+H to give yourself effectively a 30 day extension on this if needed.  Check the original post if you want details on the caps, etc.

We started hearing rumblings on Monday that eBay may delay the return/handling policy, policy and they made an announcement late yesterday that confirmed that they have bumped this change to 2009.  

Next, this eBay dev blog post says that ebay is taking back the previous announced policy that asked sellers to remove emails from their listings as part of the link policy/anonymous email (hey what ever happened to that one).  I know most sellers went ahead and did this so I guess they will either just add it back or keep it out as this will definitely be coming down the pike.

Last around electronic payments, eBay has a cryptic announcement here. What I don't get is that even if merchants are using 3rd party checkouts they have to sign up their merchant account with this gatewa?  That's pretty much all of the customers at ChannelAdvisor - why would they have to register with this company?  Feels pretty intrusive.  That doesn't make any sense to me so we'll be seeking clarification.

We're trying our best to keep everyone up to date on all of this change/no-change/change again and will keep you updated on anything else we hear.  I don't understand why they are putting out information on so many different places now (dev blogs, msg boards, ab boards, etc.), but we're monitoring all of them so you don't have to.

A glimmer of hope for feedback, yet DSRs are still a shaky Jenga tower

Things are tough in eBayland right now
For the last two weeks, I've been talking to literally hundreds of large eBay sellers to check in, see how their sales are doing, discuss strategy and share ideas+best practices around big change like FP30.  This is an annual process we go through at ChannelAdvisor to make sure everyone is ready for the holiday selling season. 

The overall mood isn't very positive as you can imagine and the one thing that keeps coming back up (as it should) is that eBay has built many of the recent programs (FVF discounts, best match, etc.) on the wobbly DSR system that leaves sellers scratching their heads and unable to make improvements.  For the record, I think the DSR intent is good - clean up the marketplace, reward great sellers, get rid of bad sellers.  I am 100% on-board with that program.  What's painful is that the current DSR system is missing the mark in many ways and causing large great merchants to either jump through too many hoops or leave all together.  In fact, the calls are frequently met with what can best be called apathy.  "Well it doesn't matter, my DSRs will keep me from doing X, Y and Z"

Dear customer, your overall grade is a 'C'
One seller used an analogy that really hit home for me - todays DSRs are like going to school and all you get is a report card with a single 'C' on it. You really want to make A's, but you can't see the individual test grades or even the subjects you are doing poorly in, just that your overall grade is a C.  The end result after dealing with this system for 9+ months without any improvement/visibility from eBay is that you resolve yourself to the C, give up because you can't possibly guess how to get to a B, much less an A and ultimately diversify to more transparent channels where you can control your own destiny, or even if you are partnered with a marketplace, you are given transparency and can improve any processes needed to have a better consumer experience.  It seems obvious, but transparency (e.g. knowing which customer/product had a problem) is good for everyone in a healthy marketplace.

Here's a perfect real-world example.  I was talking to one customer (top 100 eBay seller by GMV) and instead of questions about FP30 or how to grow their business this holiday, they wanted to brainstorm some ideas of how to deal with having a 'lowered' search standing.  To their credit, eBay implemented a snazzy dashboard that provides the 'your grade is a C' level of transparency but it stops there.

This seller noticed their search standing is 'lowered' because of a sudden dip in sales, checked the dashboard and saw why and then had to call their TSAM to get more information. It turned out that there's a rule (I vaguely remember this one, but can't find on the site - I think it was called buyer satisfaction level or something?) that is part of the umbrella Seller Non Performance policy (SNP in ebay-speak) that in addition to maintaining the 4.3 on all DSRs, if you get too many 1 DSR scores your search standing will be lowered.  This doesn't show up in the dashboard and you have to be told it's going on when your search standing is lowered. 

This seller has 4.6+ on all DSRs, yet eBay refuses to give the seller any more information than 'you are receiving 1's'.  The seller would love to know answers to basic questions like: "Which of my products have this issue?", "Is this geographically specific - e.g. non-domestic?", "Is there a correlation between low feedback buyers and 1's - can I block them?", "Why are customers leaving me 1's, leaving me positive overall-feedback,not contacting me, yet clearly are not happy?", etc.  The seller has given up and has accelerated their move from eBay because eBay's message is pretty loud and clear here: "You are making 1's and we want you off the site."

Another seller has free shipping and can't crack 4.7, another seller can't break 4.5 because half their business is non-domestic, I could go on and on with stories like this.  I would say out of the top 1000 eBay customers, probably a solid 80-90% suffer from a major DSR-related issue.

First, the good news

There is a glimmer of hope.  Lorrie Norrington announced at eBay live that eBay would bring back a system to replace the mutual feedback withdrawal  (MFW in eBay-speak) by the holiday sellling  season.

MFW was a decent system for customer-service focused sellers because it allowed sellers to say to buyers that left a negative : "Hey you had a bad experience, I want to make that right.", then execute on that and be rewarded with the effective expunging of the negative should the buyer choose to do so.  In May 08, eBay's Trust and Safety dept canceled MFW because it was allegedly being abused by bad sellers to extort feedback from buyers, etc.

eBay has been quiet as we waited and today via a developer blog post announced that it will launch what is now called Feedback Revision (FR anyone?).

• AU will be the first market to launch on October 13 (Let those noisy Aussies work out the bugs - :0 ).  The AU site has the best information on the new process and has a good help file here.  Tamebay has a good summary here.
• US will launch on October 20.  Of course none of this good stuff will be available via the API so high vollume sellers will have to MANUALLY manage this process (weeeee!) if they can get their myebay to load, etc.
• No word on the UK or rest of EU that I can find.

It remains to be seen how well this new process will work, but the important thing here is eBay listened to one area of concern and has reacted relatively quickly which is a positive.

Scot's Top 5 DSR reforms needed ASAP

Since eBay is in the mode of improving things, I wanted to share with everyone the top 5 (yes there are more, but let's get them to focus on the top 5 first!) major DSR issues that need fixing ASAP. 

1. Transparency is better for everyone - Give sellers some ability to slice and dice their DSR ratings by product, by geo, etc.  Many sellers sell 10k+ products into 5+ geographies. Give them the tools to delight buyers vs. make it impossible to delight customers.  This is a no brainer - kick bad sellers off, keep good sellers and give them the tools+data they need to deliver a world-class customer service experience.  eBay is only hurting itself here and DSRs are actually hurting the buyer experience.
   
   • FYI - eBay's TnS dept refuses to provide this transparency arguing that sellers would use it to retaliate against buyers vs. improve the buyer experience.  This is easy - provide the data and if any seller retaliates, kick them off eBay and keep the sellers that use the data the 'right' way.  The current policy basically says to me: "We have evil retaliatory sellers we are going to keep on the site, but take some of the tools they use for evil away." This mindset makes absolutely no sense to me.
   • Back to my report card analogy - Imagine this: "the School is  afraid that sharing grades with students will cause teacher retaliation. Students will suddenly want to know why they made a D on a test, why their essay was off the mark, etc."   Seems silly right, well ecommerce and retailing in general is a learning experience - what products do buyers like, what do they hate, what policies, etc. 
2. Where else can the adverb 'Very' put you out of business? - the wording around 4 stars is painfully bad (Accurate/Satisfied/Quickly/Reasonable) vs. the 5's which are currently (Very accurate, Very satisfied, Very quickly, Very reasonable).  I understand the bell curve, but telling Buyers a 4 is reasonable/5 VERY reasonable and then holding sellers to a 4.3 is feels unfair and is the single largest source of seller angst around DSRs with sellers of any size.
3. Fix International DSRs - While eBay claims that international DSRs account for only a .02 difference in DSRS, I've seen sellers with 20-30% non-domestic sales and those transactions impact them by .2-.5 (yes a whole half a star!) in both S+H cost and time.  The problem is international buyers love a great deal, but when they see their customs bill they get cheesed off and ding the seller. The kinds of sellers we want in the market aren't going to violate customs rules (which eBay is effectively encouraging with DSRs), so you have the unintended consequence of punishing the exact honest-A+++ sellers you want to keep.
   • Easy fixes abound on this one - either give immunity around non-domestic transactions on these two DSRs or give some kind of inflater or even better, educate buyers that the item they are buying will be subject to customs, do they understand this?  Even better - implement software for including customs calcs in the whole transaction so we avoid the train wreck all together- wouldn't that be awesome?  Again - transparency is the way to go in all ecommerce transactions.  Is it a great buyer experience to order a $200 diamond ring and then to have to learn your customs are $75?
     
4. Get rid of the shipping time DSR and measure this with software - eBay knows when the buyer clicks the 'pay now' button and when an item ships, so make this a software measurement and set a bar and hold sellers to it, vs. a survey.  Of course as a buyer, I always want things to a) ship faster and b) ship cheaper - duh!?  This is like a survey from the IRS - were your taxes too high Mr. Tax payer?  This is probably too radical for eBay to consider, but they really should.  It's time for some radical behavior.  To quote Tina Fey: "Let's get all Mavericky in here!"
5. Nuke UPIs - I'm convinced that the UPI process is just so broken that it needs to go away totally. If eBay won't take that step, at least stop buyers from the ability to leave negatives or worse postives+1 DSRs. (Also probably too Mavericky)

Call to action
For you sellers out there with a TSAM or access to eBay management, we need to work together for the longevity of the eBay ecosystem on these 5 fixes or I fear that eBay will continue to lump more and more programs on top of a wobbly DSR foundation and if you've ever played Jenga, you know how that plays out.  Right now these DSR flaws make the eBay Jenga tower feel like it has one little crooked block and is 20 stories high and the wind is blowing at 20mph.

SeekingAlpha Disclosure: I am long eBay and Google

 

eBay misses own shipping cap deadline, media sellers confounded and befuddled

Back in August, along with a host of other changes, eBay announced shipping maximums (caps) for the media category.  They also published a checklist that pinned the date to October 5th.  Well here it is October 6th and... nobody knows why, but it hasn't rolled out.

Some sellers are reporting they've heard October 16th, others say it's been delayed till Q1. What's disturbing is nobody at eBay seems to know the answer.

Why does this matter?

You may be asking yourself why does this even matter? Why can't sellers just go ahead and set up the limits now and not worry about the date.  The problem is that ecommerce is a zero sum game and a marketplace has to change all at once for someone not to be the loser.

Let's look at scenario, for example video game systems (with a $15 shipping cap as per eBay).  Let's say these are $100 items with shipping included (all in).

Seller A lists these for $80 and $20 shipping

Seller B lists these at $1NR with $20 shipping 

Seller C is a model citizen and lists them at $85 with $15 shipping

Seller D is also a model citizen and is an auction traditionalist, starting the systems at $1NR with $15 shipping.

The whole reason eBay is implementing the shipping caps is because eBay buyers don't look at S+H cost very closely so with that caveat, Seller C is immediately at a disadvantage because their item is $85 vs. $80 on the others.  However, if they do get a sale at least it will be for the $100 target.  If they do sell something, they'll have the pleasure of paying eBay's FVF on $5 more so they face a higher effective take rate vs. non-compliant sellers.

While Seller C is in pain, Seller D is truly hosed because to buyers it looks like the market is saying $80 for the items, thus they stop bidding at $80 and the seller is left with a paltry $95 in total sales.  What's $5 you may ask yourself, well this seller was probably going to fund some S+H cost in the core price so they get a triple wammy.  Electronics margins are very thin and $5 on almost any sale with of $100 item destroys all margin.

Time for eBay to get buttoned up on these changes

The bottom line is eBay has to start realizing these changes impact their customers in serious and profound ways and are not to be taken lightly.  Of course a (maybe) unintended consequence of these kinds of random activities is that they really destabilize auction sellers who find themselves having to switch to fixed-price for some continuity or leave eBay for other pastures.

Can you imagine any other business doing this?  What if your employer told you pay day would be October 25th and then moved it to October 31st?  What if you hustled to do your taxes, and the IRS moved it June this year unannounced?  Those seem ludicrous, but this is how it now feels to sell on eBay.