359 posts categorized "Of interest to ebay sellers"

October 07, 2008

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



 

October 06, 2008

Advanced Amazon webinar and other ChannelAdvisor items.

This week Wednesday (October 8), at 2pm I'll be hosting a webinar with some of our Amazon experts at ChannelAdvisor.  This is a follow-up to the very popular September 10th introductory-level webinar we co-hosted with Amazon.  At this week's webinar we'll be going into some more advanced strategies and can give you more of an independent view of some areas of Amazon since we aren't co-hosting with Amazon.  If you sell on Amazon today or plan on selling before the holidays this is a great opportunity to learn some of the advanced strategies we're seeing and also have your questions asked.

You can register for this week's webinar and catch the September one here (scroll down for the archived webinars).

Back on the eBay side of things, our friends at Vzaar who offer some great in-listing video options for eBay are offering some specials for ChannelAdvisor customers that include a $600 value and are detailed here or email jamie@vzaar.com directly.

September 24, 2008

Is Google hitting eBay while they are down?

Ever since 9/16 when fp30 rolled along with a bunch of finding bugs, we have seen sales plummet in many categories with apparel and jewelry being hit the hardest.

While most sellers are focusing in on some of the eBay finding wackiness, one seller noticed google had all but disappeared as a 'source' of traffic in their advanced store reports.

Based on that tip, we started doing some looking and saw some very unusual behavior.

Here's a search for a popular Nike product's model number:

Goog_ebay_search
Notice that the second, third and fifth search results are all for eBay international sites and not ".com"

I've run literally hundreds of searches and you have to really work now to find eBay in the organic (and even paid I'll add) google results.  Interestingly enough, when I did find the occasional eBay listing in the index, it was an FP30.

Note that eBay's pagerank (PR) doesn't seem to have changed - it's at 8/10.

Theories on what is going on...
I have a couple of quick theories on what's going on:

  • Given their track record in the last couple of weeks, it's possible that eBay has done something to mess up the crawlability of the site.
  • It could be that eBay has asked google to not crawl anything but fp30 dramatically reducing the number of eBay listings in the google index (this doesn't seem very smart, but hey anything's possible I guess)
  • It could be that Google is using this tough spot for eBay to kick them in the ribs and has decided that eBay listings are 'not relevant' and yanked them from the index.

Personally I think the last theory is the most probable given the near overnight disappearance of eBay's listings from the Google index.

Readers - any insights into what you are seeing/think is going on?
SeekingAlpha Disclosure: I am long eBay and Google

September 08, 2008

Webinar this Wednesday: Take full advantage of selling on Amazon

This Wednesday at 2pm ET we're co-hosting a webinar with Amazon (Sam Wheeler- Director of Merchant Services) around how to take advantage of the various Amazon offerings.

We've got a range of introductory to advanced materials so whether you are an Amazon guru or just getting started, I think there will be something for everyone.  We'll also have time for Q+A.  At all of our events Sam is usually swamped with questions from attendees so I'm sure this will be a great chance to get your questions answered around amazon's solutions for third-party selling.

Registration is here.  Both customers and non-customers are welcome to attend, there is no charge for this event.

August 26, 2008

Datapoint to ponder...

While working on tomorrow's webinar, I re-read eBay's Q2 results.

They reported that 43% of eBay's business is now fixed-price.  That would make eBay 'fixed-price' effectively a $27B marketplace.  Analysts guesstimate Amazon's 3P GMV at $4-6B.

Also, eBay's definition of fixed-price understates it substantially I believe. In eBay's definition it would be store listings, fixed-price listings and auction/bin where the user chose BIN.

Think of how many auctions close with one bidder.  In my mind those are transactions that should/could have been fixed-price.  I'd say that something like 40% of the auctions I checked in our dataset have one bidder.  With this expanded Wingo definition of fixed-price, I bet fixed-price is already 60-70% of eBay's GMV.  Also, eBay's 43% is by GMV, not transactions.  Most Motors/passenger vehicles are still auction-style listings and media is dominated by fixed-price so auctions I'd bet have a much higher ASP than fixed-price, so if you looked at the %'s by transaction you could get this number into the high 70%'s.

I guess my point is that eBay maybe much more down the fixed-price path than everyone realizes....

SeekingAlpha disclosure: I am long google and ebay

Channeladvisor announces StoreAdvisor Premium!

Sap Today we're excited to announce the availability of StoreAdvisor Premium.  When we initially came out with our first ecommerce offering (CA stores, which today we are rebranding as 'StoreAdvisor Standard'), we were pleasantly surprised by the results customers were able to achieve by encouraging customers they acquired from ecommerce channels like eBay, Amazon, etc. to become regular shoppers of their own store.  For many customers that were previously 100% channel-based, their ecommerce site grew quickly to be 25-50% of sales without much extra promotion.  As you can imagine if someone is doing $10-20m/yr on eBay, then opens an ecommerce site that does about half of that volume on top of their eBay business it exceeds everyone's expectations.

Based on feedback from customers that wanted more than StoreAdvisor Standard was designed to provide, we started working on a move advanced solution.  After acquiring Marketworks last year we decided that their Premium Web Store (which forms the heart of StoreAdvisor Premium) was the way to go.  For those customers on the MW platform (MarketplaceAdvisor Std) we can now move them to our premium marketplace product while keeping their advanced store solution intact.

The engineering team worked diligently on addressing every single one of StoreAdvisor Std's limitations, but was careful to not break anything and where possible enhance Standard's strengths (single integration, simplicity, etc.)  We were pleasantly surprised (shocked) when our call for beta customers was literally oversubscribed in a matter of minutes!

Today we're really excited to see StoreAdvisor Premium come out of beta in time for our  customers that are interested to get onto the platform for the holiday selling season.  In fact, we have many design partners already enlisted and trained to help out should we need it.

In addition to being an obvious choice for those ChannelAdvisor customers who feel they've outgrown our standard store offering, we're seeing retailers on platforms like Miva, Yahoo! Stores and OScommerce evaluate the offering because of it's super-tight integration into not only marketplaces (eBay/Amazon/Overstock), but also the entire CA Complete suite: SearchAdvisor and ShoppingAdvisor (and rich media soon).

In short we think StoreAdvisor premium is a killer platform for mid-tier retailers who either are leveraging their channels to grow their ecommerce sales or are already experiencing ecommerce success and want a more tightly integrated solution that ties all of the channels together and helps manage inventory and orders from a centralized location.

For more information:

  • Our friends across the pond at Tamebay had an article/case study earlier highlighting ProtoGolf's move to StoreAdvisor Premium you can read here.
  • You can download a complete product packet here.

Reminder for tomorrow's 'eBay Changes' webinar

The team at ChannelAdvisor has been busy digesting and analyzing eBay's announcements last week.  We have some early thoughts on who is impacted the most and strategies for you to start thinking about as the changes go live in mid-September which is just around the corner.

The webinar in Wednesday, August 27 from 2pm-3pm ET and you can register here.   As with all of our webinars this is for anyone in the eBay community, not just customers.  The one caveat is we will be briefly discussing how our MarketplaceAdvisor Standard and Premium offerings will address the changes, but otherwise the content is more about helping the entire community.  I hope everyone is able to attend - if you aren't a replay will be available approximately 24hrs after the webinar.

August 22, 2008

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.

August 20, 2008

Major eBay changes - a new listing type is born!

**Updated to reflect typo in 'other category tiers' and clarify effective take rate calculations.

Today eBay announced (microsite and ebayink) another package of changes (fingers crossed this is the last of them for 2008!).  The bulk of these changes roll mid-Sept so there's some time to ponder them and change strategies (more on that after the summary of changes).

There are some minor/expected/well predicted changes such as:

  1. Electronic payment policy - eBay is eliminating non-electronic payment methods such as cash and money order.  The argument is that these are the least safe methods out there.  Merchant credit-card accounts and paypal (of course) are now the only valid payment options.  There will be lots of consipracy theories around this effectively being a step towards a paypal-only world for eBay and what-not, but for business-oriented sellers this won't be a surprise or a big deal.
  2. Shipping limits - eBay tested these in DE and must feel they worked well as they are coming to the USA. Basically certain categories have S+H 'ceilings'.  You are not allowed to list anything that has S+H above the ceiling.  However,  if you have multiple S+H options, only one has to be below the ceiling, others can be above (e.g. if you have standard+expedited shipping, the standard has to be below the ceiling, but expedited can be above).
  3. FVF discount for free shipping - There's going to be some pretty compelling discounts for offering free shipping. I'm guessing these will DSR based so my concern here is that it's generally well known by sellers that DSRs are broken (UPI and international) and thus I worry that eBay continues to build on this 'less than perfect' foundation.

The meat and potatoes - Welcome the new FP30 listing!
Prior to today's announcement, sellers effectively had two listing types (and associated 'rate cards' for each): core and store.  eBay has now introduced a new, third, listing type that is kind of positioned in the middle.  It's a 30-day, multi-quantity fixed-price listing (I call it FP30 for short).  I say it's in the middle because it has the lower listing-fee and duration of a store-listing, but it has a lower fvf (by category) and it gets core exposure.   Sellers that wanted FP on core had to kind of wedge their item into the auction pricing (which is expensive because the listing tiers up based on price) and live with a shorter duration (7 days on avg).

Taken individually this is not something that I think would be a big change, BUT when you marry this new listing type with the changes that eBay has made to BestMatch and Finding (de-dupe and 10-limit), eBay's strategy has become much clearer.

With this new listing type instead of fixed-price seller wedging their listings into the auction marketplace, there is essentially a bifurcation of the marketplace.  You'll have the old auction world with it's rate-card  and search algorithm (BM that consideres ending-time)

And now we have a new fixed-price world with it's own listing type, search engine (BM that ignores ending time) and fee structure

The new FP30 fee structure
Here's how I've been thinking about the FP30's fee structure.

First it has a .35 listing fee - regardless of start point.  You can list an item for $1 or $1m and it's still .35.  Also remember this is multi-quantity so you can list quant=1 or quant=1m and it's still .35.

FP30 has different 'tranches' than auction-style listings (auction dips at $25, fp30 at $50).  I call them T1, T2 and T3.

T1: $0-50
T2: $50-$1000
T3:$1,000+

And finally FP30 has FVFs for these tranches that vary per category.  Here's a quick summary of top categories:

Computers: (this is the lowest and very aggressive IMO):

T1: 6%

T2: 3.75%

T3: 1%

 

CE+photo:

T1: 8%

T2: 4.5%

T3: 1%

 

Media:

T1: 15%

T2: 5%

T3: 2%

Motors parts+accessories and apparel:

T1: 12%

T2: 9%

T3: 2%


All other categories:

T1: 12%

T2: 6%

T3: 2%

Example of FP30 economics

To make sure everyone understands FP30, here's an example.
SellerX lists 20 pairs of shoes for $50 (each of course) and sells 10 of them over 30 days.

Listing fee: $.35 (note this is not *10 as it is multi-quantity for one price)
FVF: 12% * 50 = $6 * 10 = $60
Effective take rate: $60.35 for $500 in GMV for an effective take rate of: 8.28%

Comparing this to the auction rate card is a little apples to oranges because there are lots of variables, but let's do an exercise that gives the decent auction economics to see which comes out better.

SellerX lists 10 items for $50 (well that would be dumb so they list it for 49.99) and they all sell (100% conversion rate).

Listing fees:
10 * 1 = $10

FVFs: 10 * (2.19+3.5*25) = $30.65

total fees: $40.65.  Effective Take rate: 8.13%

So in this scenario, auction-style wins. However if you drop the conversion rate to 33%, you get to where the listing fees are 30*1=30 and the total fees go over the $60 FP30 range.

The other variable is ASP and I encourage everyone to experiment with this math for your items using your conversion rates and ASP to see what's right for you.

Impact on seller's strategy
In the economic example above, 33% conversion rate was a tipping point where the FP30 listing's lower listing and higher FVF makes it less expensive from an effective take rate perspective.  So one strategy would be to consider auction+fp30 as essentially three 'buckets' driven by conversion rates (look at it per sku):

  • If CRs > 50 - you should probably continue with the auction-style listings, use BIN if you need true fixed-price.
  • If CRs between 10-50, you whould consider fp30
  • If CRs < 10 you should look at eBay stores or not list the items on eBay.

The pitfall with this approach is my sense is eBay is going to really favor fp30 within BestMatch so most likely SKUs will behave differently under each and you'll have to experiment.  For an extreme example, you could have a boat load of an item that in auction format is basically hidden by bestmatch+dedupe and you get a 5% CR.  You'd be ready to move that puppy off eBay in a heartbeat.  However if you put it in FP where it's not de-duped and hopefully not going over your 10/page, you could bump up to 40/50% CRs which would indicate put it in auction-style, but that wouldn't be right in this case.

Another way to think about this is the fp30 gives you the chance to stuff as much product (opportunity GMV) into your 10 listings/page as possible for great economics.  So there's a 'store shelf' play here too to consider if you are having dedupe/10-limit issues.

ChannelAdvisor + FP30
Realizing the strategic importance of FP30, we've made sure that both our MarketplaceAdvisor standard and premium offerings will launch with support when FP30 hits the streets in mid-Sept (we're ready now).  We're also holding a free webinar for customers and other interested parties to discuss the new format and some other strategy ideas we have. This should be a great foundation heading into the holiday selling season and you can sign up here.


SeekingAlpha Disclosure: I am long Google and eBay.

August 08, 2008

Clarifications on Amazon Checkout post

Last week in my haste to get a post up quickly about Amazon Checkout, I was unclear on a couple of things and have gotten many questions about it.

Specifically I want to clarify this statement:

"The fact that Amazon has a well documented history of using partner data to their advantage in the third-party selling world will make this argument very believable."

The word documented I used here incorrectly implies that there is some formal/legal document around this topic.  That is definitely not the case to my knowledge and didn't get my point across correctly.

What I meant was that in conversations with hundreds of sellers that are in one of Amazon's 3P programs, the top concern invariably is over the fact that they do or may compete with Amazon retail.  In fact probably half of the sellers I've talked to have some specific example that usually sounds something like: "I started selling my top seller widgetX on Amazon merchants@ and then three weeks later, amazon was competing with me."  or "Amazon went to my supplier and was able to get it cheaper and now I'm at a disadvantage."

I've heard this kind of story so many times that to me it's part of daily life of being on the Amazon platform.  And the one thing I always mention to sellers looking at Amazon M@ is that this is the top concern for existing merchants on the platform and to take that into consideration.  I'll say something like: "If you worry that amazon retail may compete with you on the platform, then you need to take that seriously into consideration because it does happen a lot especially in the 'hits business' ".

On the flip side, having talked to many many Amazonians over the years they've had these programs, I do know they have worked hard to create a Chinese wall.  In fact there are literally two different companies.  The 3P stuff lives in Amazon services and the retail biz lives in amazon proper.  They do not flow data from the services side to the retail side, but they do flow data from the retail to the services and to third parties (for example, there are APIs to know when something is out of stock for 3Ps).  So I guess it's a one way chinese mirror wall?

So if the Chinese wall exists, why are sellers concerned? 

Seller's worry that the retail side is using their data to make their decisions.  Most of the time when you dig into it, it's pretty obvious that Amazon probably would have started selling WidgetX regardless. 

For example, "I was the first seller of webkinz on Amazon and then they came and destroyed me by going direct!"  This one is obvious, but then I had a trampoline seller tell me the same thing. 

That's one that there's just no way to know what happened. We'd have to go back in time and have the seller not sell trampolines and then see if Amazon still started selling trampolines regardless of that seller's activity. Thus there's no way for the seller to prove that amazon did something and there's no way for amazon to prove they would have been in the trampoline business regardless of that seller.

So part of life selling on Amazon is that you could be competing with them at some point and on some products.  Many sellers actually use this to their advantage and keenly watch for Amazon to go out of stock and then act as backfill on those 'hits' products and also enjoy the long tail where Amazon doesn't play.  In my original post, I was trying to point out this fact of life on the Amazon platform and comparing it to Paypal/Google checkout that obviously don't have a retail component so 'direct retail' competition isn't a factor/concern.

Finally, I used the acronym AC and it turns out the official Amazon acronym is going to be CBA for 'Checkout By Amazon' - so if you talk to anyone at Amazon about the program definitely use CBA and not AC (unless you want to talk about Atlantic City).  CBA also fits more nicely in the family with FBA and other TLAs.

SeekingAlpha Disclosure: I am long google and eBay.