PESA – Telling eBay What's The Problems Are = No Confidence

PESA

PESA

When the longest standing eBay trade organization comes out with a statement like this, few additional words or commentary are needed.

Other than to say...

Listen Up eBay, in political parlance - You have lost the core audience, your evangelists are few and far between... When PESA publicly sends out a message like this... Someone should take note.
  
From: noblespirit
To: ! Professional eBay Sellers Alliance

Subject: PESA/ECMTA Position Paper, September 30, 2008

September 30, 2008

PeSA Official Statement on eBays Marketplace:

Deteriorating eBay Market Conditions Erode Seller Confidence

Members of the Professional eBay Sellers Alliance have been concerned with the vibrancy of the eBay marketplace for the past few years. In the first nine months of 2008, we have observed a substantial deterioration in the value of the marketplace for merchants. Broader e-commerce growth is in the high teens while eBays GMV has increased at low single digit rates; a clear sign that eBay is losing wallet share among online shoppers.

We were encouraged with the culture of change that swept through eBay during the past 12 months; however, we believe the flawed execution of change has accelerated the deterioration of the marketplace. Today eBay merchants have an increased level of business uncertainty due to eBays poor execution of changes in many areas including seller performance measurement, fees, site search, buyer activity, and seller communication. The result is that merchants are changing their behavior in ways that we believe is not beneficial to the eBay marketplace.

Merchants are pursuing alternate channels for their businesses which are more economical, including launching their own website, participating in other third party channels such as Amazon and Overstock, and even opening brick and mortar stores. Based recent feedback from PeSA members, merchants are focusing on other channels at higher rates than we have ever measured in the past. Prime products that used to find their way to eBay, are now being diverted to these new "premier" channels that are reportedly delivering higher margins with greater certainty and decreased overhead.

Merchants that used to prioritize the eBay channel now regard the marketplace as a venue of last resort used mainly for liquidation of product that doesn’t sell elsewhere. eBay has acknowledged that it may have an undersupply of merchandise on the site, however, they fail to recognize that the supply issue on eBay is a direct result of their relationship with their customers, the sellers. The lack of credible communication from eBay to its sellers about its strategy has resulted in a marketplace of skeptic sellers, which is bad for business. We would like to highlight eBays recent move to allow "big box" retailers free access to eBay, at a competitive advantage to its existing seller base, as an example of a decision that exacerbates the situation by threatening the diverse supply of merchandise that shoppers expect on eBay.

As PeSA has stated in its prior position statements, the real issue affecting eBay is buyer activity. We believe that issue still exists. According to eBays latest published results, eBay's annual active user churn rate was close to 40%. eBay has discontinued reporting the data that allowed us to actively monitor the issue, but based upon the flat active user growth, we believe eBay is still seeing poor user activity.

Unfortunately, most of the changes at eBay have been focused on sellers, not buyers. We are proponents for measuring the performance of sellers and rewarding those sellers that provide positive customer experiences. The concept is used in other marketplaces; however, the eBay execution of that concept resulted in a Detailed Seller Rating (DSR) system that is substantially flawed both in its measurement and transparency. We understand that a new system will not be perfect and should be adjusted as experience builds. The real problem is that eBay seems to be building on top of a flawed DSR system that has not been adjusted to reflect true buyer experience.

At PeSA, our position on eBay fees has been that as long as sellers are receiving value, eBay is certainly entitled to share in that value. During the past few years, that economic balance has shifted dramatically to the disadvantage of merchants. In our opinion, eBay still does not recognize that their excessive extraction of value in the form of fees and other monetization techniques has resulted in dramatic underinvestment on improving the marketplace. Declining buyer activity also has a direct result on average selling prices and conversion rates on the platform. Thus the lower margins in conjunction with rising eBay fees, results in eBay taking more value while leaving less for merchants.

In addition, the diversion of traffic off the eBay platform in the form of advertising (run by Yahoo in the US ) helps eBay monetize the marketplace, but leaves less buyer traffic for merchants that list on eBay. And, the greater compliance burden of operating on eBay combined with the risk that a merchant business will be shut down with little visibility creates an unworkable environment.

We embrace the effort that eBay has made to adjust fees to better align with the success of merchants. But, again, the implementation of the changes comes across as an effort to increase the take rate on merchants without really investing in the marketplace. While eBay lowered the upfront cost to list on the marketplace, they dramatically increased the fees on the back-end. We were disappointed with this approach and would have preferred that eBay show some commitment to increase value to the marketplace before raising final value fees on its customers.

We argue that the declining economics on the marketplace justified lowering front end fees without an associated increase on the backend. After all, less buyer activity means that the marketplace is not as valuable a channel for a merchant and the cost to list on the marketplace should be less. Unfortunately, eBay does not see it that way and the result is that eBay is placing the burden of all the changes on the marketplace on the backs of its customers, which are its merchants. We continue to experience one step forward on concept and two steps back with execution. We cannot find any other case where a company, with the desire to restructure and improve its business, places the burden squarely on its customer base.

PeSA is focused on promoting professional and successful selling on the eBay marketplace and are actively working with all professional sellers to help them navigate the changes on the marketplace. We believe eBay still needs to better understand its customers and we hope that sharing our views helps highlight the most pressing issues. it is our intention to continue working with sellers and with eBay to effect positive change in the marketplace and will be publishing additional papers with more specific commentary in the near future.

Thank you,
PESA Board of Directors

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0 Responses to PESA – Telling eBay What's The Problems Are = No Confidence

  1. Ramesh Dave October 8, 2008 at 12:36 pm #

    PESA is right about loss of confidence. ebay has no protection for buyers. You can use ebay checkout and seller can still come back and ask for more money. They can refuse to ship and ebay will absolutely do nothing for the buyer. If you did not pay thru Paypal, you lost your money.

    Does PESA do any monitoring of sellers ?

  2. J Bricks October 13, 2008 at 7:11 am #

    Just when you think you will never meet another living thing with less intelligence than a Jelly Fish……

    Along comes Ramesh Dave !!!!!!!!!!!!

  3. tim October 23, 2008 at 11:47 am #

    Ebay being a venue is not what is felt by sellers, most sellers I have interviewed said they fell like they went from being there own business to working for e bay in 6 months. Many of them pink slipped because of flawed policy change that does not take individual dynamics of each seller.

    It should be clear, I am a wholesaler and not a good writer or a stock expert, but I have a first hand inside look having been a powerseller almost from e bay start, for over 10 years, 1.7 million per year sales and account for $156,000 paid to e bay per year for seller fees, this is the bases in which e bay shows profit or loss in a great way for there core business, this does not account for paypal fees charged, seller manager pro, e bay stores. Buyers and sellers are leaving e bay, this can be proved by http://www.sellerdome.com/

    It is interesting how the 1500 employee lay off received so much attention, however, the 10% of total powersellers were laid off/suspended because of flawed aggressive policy poorly implemented has not had a placement. This is proved by http://blog.sellerdome.com/?p=16 between 15k-30K e bay powersellers who account for $3000-$20,000 in seller fees paid each month for each of those sellers. This seems a larger story than a simple layoff of e bay employees. Ebay saves money by laying off paid employees, but e bays profit takes a hit by getting rid of partners who contribute to e bay profit. For example: 20,000 powersellers/partners laid off/suspended that account for an average of $5,000 per month seller fees = $100,000,000 each month in seller fees not received by e bay. That is $1,200,000,000 per year in revenue given up for aggressively flawed policy by current management. The idea current ebay management had was by getting rid of 10% of its selling partners was going drive back 32% of its buyers, however, that has clearly not been the case, because the policy change was flawed and implemented with such aggression over a short period of time, 6 months total, 320months aggressively. Ebay seems to have driven away buyers by this and the new search method that sellers or buyers don’t like with no concern of management. The company has managed to drive its investors away in the same motion as stock prices show a drop since new management put in place 6 months ago, before market crash. Ebay management charged its sellers/partners for decline in its core business and seems not to have taken into account the increased competition of walmart, best buy, circuit city and many others putting marketing dollars into the online sector of business. Ebay pushing away its partners, sellers and buyers, is only going to make profit softer and push away investors. With 70% more competitors in the market e bay only dropped 30% seems a strong market hold for e bay and a reason to support its partners in a currently working policy rather than place blame partners and will prove to decline its future market share which is pointed out by many market analysis.

    Ebay, through the wild west style new management, took a look at itself and realized it had a drop in the number of sellers buying on its site. It decided it was because of bad “buyer experience” and immediately, it seems without full thought of backfire, decided it was the sellers fault. In some cases, this may be true, but it is most likely because of the additions to online retailers such as walmart, bestbuy, circuit city and the lis t goes on that were not competitors before and had not sunk the marketing dollars into the Internet sector of there business plan before. The more big sellers the less customers for ebay. It is widely known that e bay has blamed sellers rather than external forces for the slow in sales. Instead of working within the community, that once believed that people are basically good, took on a policy that made its community fell like criminals and strong feelings of dislike for the symbol that was once regarded. Ebay has aggressively pushed away its partners will prove to decline its future market share and a relationship that may go un repaired when new management is called upon.
    Ebay has withstood the .com storm because of a superior system and its ability to hold steady to the working core business policy. Its customers fell that is no longer the case and many companies like bonanzle.com and OLA.COM (onlineauction.com) are rushing to try to meet seller and buyer demands that ebay seems unwilling to meet. Many small auction sites have tried to compete in the past but been successful in driving traffic. Now a once complacent audience of e bay buyers and sellers are seeing the changes and the likely hood t hey are being driven away through aggressive, unfair, flawed policy changes and are taking note to change to someone with the old values that made ebay a community that worked. You can see from the chart below the demand that is being driven to for example.
    http://www.quantcast.com/bonanzle.com
    This is a small amount of buyers and sellers compared to e bay, but it does show a market who is hungry to meet the demand of current buyers and sellers, and what is maybe most important that buyers and sellers are finding the ability for change.

    When e bay was a “venue”, now it is felt by many of its sellers that it acts as an employer or landlord by design of new policy, it was profitable for sellers and a great value for buyers. Sellers drove traffic to the site because buyers knew they could get many of the items for a large percentage below retail, at or below wholesale. E bay is a follower now and is trying to make itself like Amazon and other .com retailers. Ebay sellers who use Amazon report little to no sales. E bay has a niche (wholesale products) and Amazon has a niche (books, CDs with unmatched distribution etc) and both worked independently of each other, this is why Ebay sellers are not successful on Amazon and Amazon sellers are not successful using ebay. New ebay management has had a hard time realizing Amazon is a different market plan. Many e bay sellers are leaving to do Amazon but it is feared this will not prove successful for them. The e bay system worked and most were satisfied, buyers and sellers could realize other bad buyers or sellers.
    Buyers and sellers are not happy anymore and the numbers will continue to show as long as this management stays. Economy will play a roll, that is why ebay can’t afford to gamble with management that has proven to drive its partners, sellers and buyers, away. The company is large enough it will be around for a long time, maybe not in the online auction sector effectively as it was before, but it is still a mystery to many who use or used to use the site why this management has been allowed to make this aggressive of a change. If this is where they wanted to go, it would takes years to change a company this size effectively, it can’t be done in 6 months times and certainty not given a slow in the economy.
    Things are not happy under new management/John Donahoe management has made no one happy, sellers or buyers or its investors. It has been a 6 month meltdown since new managemen t fumbled a working system.
    I talked to the owner of onlineauction.com 1-800-900-2828, Rowen Grisham, a previous e bay powerseller who seen improper change coming long before many sellers and buyers realized. He said he had seen a flood of sellers and buyers calling to learn about the site in the last 4 months. Rowen Grishamw says they are about to roll out a goggle search program that will make it more visible. This is just one example of where e bay buyer and seller base is going. Grisham seems to want to supply its sellers and buyers with a fair service, as when the ebay site was born and acted as a venue rather than an employer. Small companies that are hungry and taking advantage of a situation where ebay is not satisfying its demand.
    Anyone considering investing or putting time into future sales may want to take a look at the=2 0aggressive, flawed policy’s they have put in place, there are little to no direct policy as there has been. Sellers, buyers and investors wouldn’t be leaving if there was any good reason to stay.
    E bay has done a poor job or emplaning the new changes to its buyers, sellers only after a few months of effect, some loosing there e bay business because of improper, unmonitored data, is still learning and it seems no one knows the answers even at the top account managers level. Its buyers do not realize that the DSR DETAILED SELLER RATING, the 5 stars under the feedback rating is not based on a 100 point scale like every other system in the free world. For example, from 1 to 5, 1 is poor, 3 is average and 5 is excellent. With e bay, 4,5 is average and 5 is good, I am glad they didn’t have my math teachers in Collage. So many times buyers rate a 3 when they don’t realize they are giving the seller a unacceptable rating that could potentially suspend his/her account from e bay as so many has been suspended in the last 3 months because of improper data that has been now used as the bible of e bay to rate seller performance. It should also be noted that a flaw in the data of the 5 star DSR is that if a customer is happy, they fell that leaving positive feedback served its purpose and they have caused a positive vote to the seller, e bay has not educated the buyer, so they do not leave a star rating at all, and are not required to and a large % do not, but leave a positive feedback as it is not required. But the buyer who is mad and is leaving hasty feedback will be more than motivated to leave a 1 or 2 for all stars. For this reason, good sellers offering great service and products are being suspended from e bay by record numbers, this cuts the life cord of the seller as well as core business at e bay and the reason buyers come to the site and investors invest in the company.

    Ebay may have ruined their market flair for both buyers and sellers forever. Too many restricting rule changes, increased charges, paypal demands, seller ratings. This has ultimately destroyed their bottom line.

    Many sellers, buyers and investors alike have a dedicated special interest and hope they turn themselves around, but it is going to take some quick and correct policy change back to the system that worked to undo what has been done in what would be considered by many as well as a powerseller account manager in a telephone conversation said that this is “the most aggressive change e bay has ever done” it is costing sellers there business and driving buyers away from the site. The Best Match search is fatally flawed and $0.35 listings are not going to fix that.

    Sellers of the unique items that made eBay famous (and who paid listing fees) are leaving in droves, while eBay brokers deals with corporate sellers of new stuff you can get anywhere who don’t pay listing fees deteriorate the profits. And their buyers are following them. Watch the Q4 and Q1 figures. A company of this size can keep up appearances for some time, but its customers, its customers customers, that is sellers and buyers, are speaking up and cannot be ignored in the long term, the leader of these policy’s are and continue to drive away the core business of e bay and investors are taking notice.

    E bay bought Bill Me Later, I would have been surprised just 6 months ago, but I am unhappy to report that I am not at this time, the reason is this management has taken down the tread that holds e bay together as can be seen by its buyers and sellers everywhere complaining about the flawed aggressive policies that have taken place over the last few months, maybe you have heard some of them or are one of them. Every comment citing that the previous system was not broken. E bay has had community and trust, this 13 year trust has been violated and has failed both sellers and buyers in just a few months of unfair, faulty policy change that has taken a ship this size and turned it so fast that it is out of control and is facing a challenge to bring the ship back to course as it was before in the core business, although still ignored by management at this time, this is just in the core business, this shows the danger of a lateral move like credit right now. Take into account there could’t be worse timing as the world economy will not view this favorably given recent events. This policy change was over a short aggressive period, but the negative impact will make it difficult to navigate back in position, if this venture is not successful, it will be even worse for ebay, its investors, and20the management that follows. The core business has taken a great hit world wide, now it is committed to a market that is new. A new market during the time when its core business is in jeopardy due to flawed policy and a slowed economy with management proven only to drive away customers. This will prove a challenge that may take years to repair relationships of its sellers and buyers when it has been realized by investors concerned on top of unpopular credit service. Migration back to the system with effective proven 12-15 record, built by previous management over 12-15 years, seems to be the only way to save the future profits and stability the company once enjoyed.

    So, e bay wants its investors to trust it in a huge risk buy, when the investors are clearly concerned and most can see that e bay can not run its core business in a way that is satisfying to its customers, causing them to leave, look for other suppliers that will eventually be able to meet demands of the once complacent sellers and buyers. Sorry, it would be hard for anyone with basic knowledge of the problems with recent policy of the core business to buy this, having been a seller and buyer for 10 years, it makes it even harder to buy. I can say, I am happy to report my family, who bought stock when they=2 0seen my success on e bay, sold there stock when I explained the new managements flawed, unfair, and aggressive policy handed down. The stock has followed since this and many are betting with there dollars fell it will continue to fall. Maybe Jim Cramer, hyper as he is, has a point when he said he could not get behind the company, and that someone should buy the company “and put them out of their misery.” It is hard to argue with him, stock sold back in march, when these policies were being talked about, not yet implemented agressively, sold ebay seems to be the smart move. Stock was $30-$32 per share at that time, March 2008, it dropped every since as can be tracked from any stock quote chart. Yes, the economy took the abrupt hit, stock price had already plummeted by 1/3, $19-$22 per share, before it happened that our country was in trouble from bad credit/debt. Some say they wouldn’t want to touch this a credit market at this time. I would also not want to answer to shareholders when they learn what long time sellers and buyers have seen in the past few months. Good thing for golden parachutes I guess, maybe that will soften the fall?
    I think this report on NYtimes has some good in site of the problems facing the company with the current buy:

    http://bits.blogs.nytimes.com/2008/10/06/ebay-plays-warren-buffett-buys-online-lender/#comment-55807

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